Analyze the cost of renting, leasing, and purchasing an item of construction equipment under the conditions...

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Analyze the cost of renting, leasing, and purchasing an item of construction equipment under the conditions described. Evaluate total net after-tax cash flow and its present value. General assumptions Income tax rate 25% Tax saving rate 8% Purchase assumption Equipment cost for whole at once payment Salvage value after 5 years Yearly depreciation (year 1) Yearly depreciation (year 2) Yearly depreciation (year 3) Yearly depreciation (year 4) Yearly depreciation (year 5) Investment credit (year 1) 165000 90000 17% 19% 20% 20% 20% 10% of equipment cost cost less half the investment credit 20 % of equipment cost Cost basis Down payment for equipment Loan interest (year 1) Loan interest (year 2) Loan interest (year 3) Monthly payment for purchasing (yearl to year 3) 12498 8018 2969 4050 Lease assumption Term of lease (years) Initial payment Lease payment (monthly) 5 5 month in advance 2000 Rent assumption Rental period (years) Rental rate (monthly) from year 1 Mid-year present worth factors for i %8; (year 1) Mid-year present worth factors for i %8; (year 2) Mid-year present worth factors for i %8; (year 3) Mid-year present worth factors for i %8; (year 4) Mid-year present worth factors for i = %8; (year 5) Mid-year present worth factors for i %8; (final year) 5 2000 0.96297 %3D 0.89164 %3! 0.82559 !! 0.76443 0.70781 %3D 0.68058 %3D Analyze the cost of renting, leasing, and purchasing an item of construction equipment under the conditions described. Evaluate total net after-tax cash flow and its present value. General assumptions Income tax rate 25% Tax saving rate 8% Purchase assumption Equipment cost for whole at once payment Salvage value after 5 years Yearly depreciation (year 1) Yearly depreciation (year 2) Yearly depreciation (year 3) Yearly depreciation (year 4) Yearly depreciation (year 5) Investment credit (year 1) 165000 90000 17% 19% 20% 20% 20% 10% of equipment cost cost less half the investment credit 20 % of equipment cost Cost basis Down payment for equipment Loan interest (year 1) Loan interest (year 2) Loan interest (year 3) Monthly payment for purchasing (yearl to year 3) 12498 8018 2969 4050 Lease assumption Term of lease (years) Initial payment Lease payment (monthly) 5 5 month in advance 2000 Rent assumption Rental period (years) Rental rate (monthly) from year 1 Mid-year present worth factors for i %8; (year 1) Mid-year present worth factors for i %8; (year 2) Mid-year present worth factors for i %8; (year 3) Mid-year present worth factors for i %8; (year 4) Mid-year present worth factors for i = %8; (year 5) Mid-year present worth factors for i %8; (final year) 5 2000 0.96297 %3D 0.89164 %3! 0.82559 !! 0.76443 0.70781 %3D 0.68058 %3D

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Answer Solution Purchase Cost Year 3 Intial Year 1 Year 2 Yea... View the full answer