TJ & Parents Inc. has recently decided to go ahead with a new operating system for...
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TJ & Parents Inc. has recently decided to go ahead with a new operating system for their business. The cost of the operating system is $7,000,000 and is estimated to have a salvage value of $500,000 in seven years. The CCA rate for the new system is 21% and they will have other assets in this class for at least the next ten years. TJ & Parents Inc. can borrow from the bank at 11% and their current WACC is 15%. They have been offered to lease the new operating system with annual lease payments of $1,400,000, made at the beginning of each year for seven years. TJ & Parents Inc. marginal tax rate is 28%. The new operating system requires special annual maintenance done at the end of each year at a cost od $4,000. The lease payments do not include this maintenance. Required Should TJ & Parents Inc. buy or lease the new equipment? (14 marks) Show all calculations and round all ending figures to the nearest dollar. TJ & Parents Inc. has recently decided to go ahead with a new operating system for their business. The cost of the operating system is $7,000,000 and is estimated to have a salvage value of $500,000 in seven years. The CCA rate for the new system is 21% and they will have other assets in this class for at least the next ten years. TJ & Parents Inc. can borrow from the bank at 11% and their current WACC is 15%. They have been offered to lease the new operating system with annual lease payments of $1,400,000, made at the beginning of each year for seven years. TJ & Parents Inc. marginal tax rate is 28%. The new operating system requires special annual maintenance done at the end of each year at a cost od $4,000. The lease payments do not include this maintenance. Required Should TJ & Parents Inc. buy or lease the new equipment? (14 marks) Show all calculations and round all ending figures to the nearest dollar.
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Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
Posted Date:
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