Kumquat Farms Lad. has decided to acquire a mango picking machine. The cost of the picking machine
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Kumquat Farms Lad. has decided to acquire a mango picking machine. The cost of the picking machine Is $ and it has an economic life of years. At the end af seven vears, the market savage valuc is estimated to be $ Seven years is the time harison for analysis
The owner of kumquat Farms Ltd has discussed this acquisition with his financial sorices conglomerate. it has agreed to lend him the purchase price at persent per year, payable in equal blended payments at the ond of each year, for seven years.
An alternative method of financing the equipment would be to lease it from the local loading store. Amnual lease payments, payabic at the beginning of each of the next seven years, would be $ This would be considered an operating Icasc.
The equipment has a capital cost allowance of percent. The bonchts of any tax shields are realted at thc end of each ycar. The company's tax rate is percent. Exotic Mango Farm's cast of capital is percent.
Should Kumquat Farma Ltd Icasc or buy the picking machine? Show an calculations:
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