ADMS 4540 Study Guide - Final Guide: 0 (Year), Net Present Value, Weighted Arithmetic Mean

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orangerhinoceros250

27 Mar 2017

School

York University

Department

Administrative Studies

Course

ADMS 4540

Professor

William Lim

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Document Summary

The spiderman company is trying to decide whether to lease or buy new computer- assisted spiderweb producing equipment for new spideweb designs. Spiderman has already determined that acquisition of the system has a positive npv. The system costs million and qualifies for a 25 percent cca rate. The equipment will have a million salvage value in 5 years. Spiderman"s tax rate is 30 percent, and the firm can borrow at 7. 5 percent. Company has offered to lease the spiderweb equipment to spiderman for payments of . 5 million per year. What is the maximum lease payment that would be: suppose it is estimated that the equipment will have no salvage value at the end of the lease. Solution: the forgone salvage value is a cost to the lease decision and the lost tax shield on the resale represents a gain to the lease decision.

Related Questions

The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.7 million in annual pretax cost savings. The system costs $9.4 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 34 percent, and the firm can borrow at 9 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2.15 million per year. Lambert's policy is to require its lessees to make payments at the start of the year. The NAL for Wildcat is? The maximum lease payment that would be acceptable to the company is?

Please clarify the amount for NAL and the maximum lease payment? Thank You in advance?

azurebee925

The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling

system for its oil exploration business. Management has decided that it must use the system to stay

competitive; it will provide $2.7 million in annual pretax cost savings. The system costs $9.4 million and

will be depreciated straight-line to zero over five years. Wildcat's tax rate is 34 percent, and the firm can

borrow at 9 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for

payments of $2.15 million per year. Lambert's policy is to require its lessees to make payments at the start

of the year. The NAL for Wildcat is? The maximum lease payment that would be acceptable to the company is?

Please clarify the NAL and maximum lease payment.

taupemarten758

Help please, I am stuck!!!

The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.7 million in annual pretax cost savings. The system costs $9.4 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 34 percent, and the firm can borrow at 9 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2.15 million per year. Lambert's policy is to require its lessees to make payments at the start of the year. What is the NAL for Wildcat? What is the maximum lease payment?

Please state what is the NAL and maximum lease payment amount?

plumfish833

ADMS 4540 Study Guide - Final Guide: 0 (Year), Net Present Value, Weighted Arithmetic Mean

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