The Tasha Corporation needs a new pipe-boring machine that can be purchased for $10,000.The machine will be
Question:
The Tasha Corporation needs a new pipe-boring machine that can be purchased for $10,000. The machine will be depreciated using MACRS with a 5-year class. Tasha will use the machine for 5 years and then sell it with an anticipated salvage value of $2000. A maintenance contract will be purchased at a cost of $500 per year with payments made in advance. Tasha can obtain a bank loan with an interest rate of 7.5% and the company’s tax rate is 34%.
(EXCEL TEMPLATE) 7.) Now suppose that Johnson Leasing Corporation has offered to lease the same machine to Tasha for lease payments of $3,000 paid at the end of each of the next five years. Maintenance is included in the annual lease amount. The lease satisfies IRS rules to qualify for a guideline lease. What is the NPV of leasing?
7. What is the NPV of Leasing? | ||||||
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Lease Pmt | ||||||
Tax Savings | ||||||
Total Cash Flow | ||||||
NPV-Leasing | ||||||
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter