Witten Entertainment is considering buying a machine that costs $545,000. The machine will be depreciated over five
Question:
Witten Entertainment is considering buying a machine that costs $545,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The company can lease the machine with year-end payments of $140,000. The company can issue bonds at an interest rate of 7 percent. If the corporate tax rate is 21 percent, should the company buy or lease?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 62% (8 reviews)
We will calculate cash flows from the depreciation tax shield f...View the full answer
Answered By
JAPHETH KOGEI
Hi there. I'm here to assist you to score the highest marks on your assignments and homework. My areas of specialisation are:
Auditing, Financial Accounting, Macroeconomics, Monetary-economics, Business-administration, Advanced-accounting, Corporate Finance, Professional-accounting-ethics, Corporate governance, Financial-risk-analysis, Financial-budgeting, Corporate-social-responsibility, Statistics, Business management, logic, Critical thinking,
So, I look forward to helping you solve your academic problem.
I enjoy teaching and tutoring university and high school students. During my free time, I also read books on motivation, leadership, comedy, emotional intelligence, critical thinking, nature, human nature, innovation, persuasion, performance, negotiations, goals, power, time management, wealth, debates, sales, and finance. Additionally, I am a panellist on an FM radio program on Sunday mornings where we discuss current affairs.
I travel three times a year either to the USA, Europe and around Africa.
As a university student in the USA, I enjoyed interacting with people from different cultures and ethnic groups. Together with friends, we travelled widely in the USA and in Europe (UK, France, Denmark, Germany, Turkey, etc).
So, I look forward to tutoring you. I believe that it will be exciting to meet them.
3.00+
2+ Reviews
10+ Question Solved
Related Book For
Corporate Finance
ISBN: 978-1259918940
12th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
Question Posted:
Students also viewed these Business questions
-
Super Sonics Entertainment is considering buying a machine that costs $540,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The...
-
You are considering buying a machine that will cost you $12,000. There will be a maintenance cost of $1,000 at the beginning of each year, and the machine will generate cash flows of $5,000 over the...
-
Alta Cohen is considering buying a machine to produce baseballs. The machine costs $10,000. With the machine, Alta expects to produce and sell 1,000 baseballs per year for $3 per baseball, net of all...
-
. Current price of stock is $20 and expected price after one year is 22.5. If investor required return is 18%. What percentage of dividend should company pay?
-
Which of the following metals can react with water? (a) Au, (b) Li, (c) Hg, (d) Ca, (e) Pt.
-
You have 1.5 moles of pure water and 1 mole of CO, both at 25C and 1 bar. You want to mix them together to make carbon dioxide by the following gas phase reaction at 500 K: CO + H 2 O CO 2 + H 2...
-
The Cooper Furniture Company of Potomac, Maryland, assembles two types of chairs (Recliners and Rockers). Separate assembly lines are used for each type of chair. Classify each cost item (AI) as...
-
The transactions relating to the formation of Blue Co. Stores, Inc., and its first month of operations follow. Prepare an answer sheet with the columns shown. Record each transaction in the...
-
What are the key components of a relational database management system? Why are relational database management systems different from database models that preceded the relational model?
-
In the Reddy Mikks model (Example 2.2-1), consider the feasible solution Xl = 3 tons and X2 = 1 ton. Determine the value of the associated slacks for raw materials M1 and M2.
-
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5.2 million and...
-
Quartz Corporation is a relatively new firm. Quartz has experienced enough losses during its early years to provide it with at least eight years of tax loss carryforwards, so Quartzs effective tax...
-
A bat (Fig P17.7) can detect very small objects, such as an insect whose length is approximately equal to one wavelength of the sound the bat makes. If a bat emits chirps at a frequency of 60.0 kHz,...
-
Using the Taylor rule, calculate the target for the federal funds rate for July 2010 using the following information: Equilibrium real federal funds rate Target inflation rate Current inflation rate...
-
Discuss the effect of monetary policy on inflation. To what extent can monetary policy influence inflation?
-
In a hypothetical population of gazelles, 28 individuals are homozygous for the d2 allele, 72 individuals are heterozygous for the d2 allele, and 100 individuals lack the d2 allele. What is the...
-
The following transactions apply to Walnut Enterprises for Year 1, its first year of operations: 1. Received $42,000 cash from the issue of a short-term note with a 5 percent interest rate and a...
-
The company has reported "Accounts Payable" and "Inventory" as follows in its financial statements. Accounts Payable Balance 12,500 Inventory Balance 57,000 Date December 31, 2012- December 31, 2013...
-
In 2015, Roger pays a $3,000 premium for high-deductible medical insurance for him and his family. In addition, he contributed $2,600 to a Health Savings Account. a. How much may Roger deduct if he...
-
Use a calculator to evaluate the expression. Round your result to the nearest thousandth. V (32 + #)
-
Essence of Skunk Fragrances, Ltd., sells 5,450 units of its perfume collection each year at a price per unit of $480. All sales are on credit with terms of 1/10, net 40. The discount is taken by 35...
-
The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, 5 days past due. If annual credit sales are $8.95 million, what is the company's balance sheet amount in...
-
Air Spares is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which...
-
1 . Customs officers had the right to break into the colonists' houses without their permission. This act represents a potential threat and violation of the colonists' property rights and privacy...
-
You invest $1,000 in an account that pays interest at 12 percent annual rate, compounded quarterly. How much would your investment grow to in 5 years? You plan to purchase a BMW M5 sedan for $85,000....
-
Consider Hurd Co., a U.S.-based MNC with a subsidiary in Mexico that deals in Mexican pesos (MXP). The subsidiary requires MXP200,000,000 to finance its operations over the next three years. Assume...
Study smarter with the SolutionInn App