Delamont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4- year life that costs $40,000 and falls into the MACRS 3 - year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life, so the interest expense for taxes would decline over time. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%. What is the net advantage to leasing? ( Note: Assume MACRS rates for Years 1 to 4 are 0.3333, 0.4445, 0.15, and 0.07.). $849 • $896 • $945. $999 •$1,047

Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%.   a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Is it now cheaper to buy or lease? Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%.   a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round…

ABC Co is considering either leasing or buying a new freezer unit. The unit costs $6.4 million and it qualifies for a 30% CCA rate. The unit will be valueless in four years. ABC Co can lease it for $1.92 million per year for four years. The assets pool remains open and payments are made at the end of the year. ABC faces a tax rate of 40% and can borrow at 7% pre-tax. What would the lease payment have to be for both lessor and lessee to be indifferent to the lease? $1,985,338 O $2,200,357 O $1,965,060 O $1,937,363 $2,156,357

2. The controller has asked you to consider three separate options that your firm has for getting a new software/computer system. The first option is to lease the system. The annual payment will be $15 million for the first year and it will grow at 5% a year. The lease contract is 5 years long. In this case, the lease expenses are operating and therefore would be tax-deductible. The second option is to buy the system for $38 million and depreciate it over 4 years, which is the expected life of the project. A third choice is to buy the system for $38 million and take it as an immediate expense. The system has an expected life of 4 years. If the tax rate is 40% and the cost of capital is 10%, estimate the equivalent annual costs of each option.

Use the following information for the next two problems: Top management of Markel Company is considering whether to lease or purchase an aircraft to transport them around the country. They are in the 40 percent tax bracket and their after-tax cost of debt is 7 percent. The estimated after-tax cash flows for the lease and purchase alternatives are given below. (The Year 5 purchase cash flow is positive since they rent out the aircraft for part of that year.)             End of Year Lease  (cash flows are all negative) PurchaseYrs 1-4 cash flows are negative; Year 5 is positive. 1. (40,000) (68,454) 2. (40,000) (59,110) 3. (40,000) (63,596) 4. (40,000) (66,633) 5. (40,000)   30,056     Given the above cash outflows, calculate the present value of the after-tax cash flows of the lease alternative using the after-tax cost of debt.         Given the above cash outflows: a) Calculate the present value of the after-tax cash flows of the…

The management of Penfold Corporation is considering the purchase of a machine that would cost $390,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $74,000 per year. The company requires a minimum pretax return of 12% on all investment projects.   Click here to view Exhibit 7B-1 and Exhibit 7B-2 to determine the appropriate discount factor(s) using the tables provided.   The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

A firm can lease a truck for 4 years at a cost of $38,000 annually. The lease includes maintenance. The firm can instead buy a truck at a cost of $88,000, with annual maintenance expenses of $18,000. The truck has no salvage value at the end of 4 years. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10% Round your answer to the nearest dollar and report it without the $ symboli

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner that costs $2 million and it would be depreciated straight-line to zero over a four- year period at the end of which it will be completely valueless. Assume the tax rate is 33 percent. You can borrow at 6 percent before taxes.   How much would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease?

You work for UTAR that is contemplating leasing printers. Printers’ costs RM 650,000 and would be depreciated straight-line to zero over a decade. You can lease it for RM 100,000 per year for a decade.   (a) Assume that the tax rate is 20 percent. You can borrow at 10 percent. Adopt the lease-buy analysis to recommend the best option to UTAR. (b) Malaysia’s government provide a 5% tax reduction during this Covid-19 pandemic. According to the new tax rate, should UTAR remain the option selected in (a)?

The garden supply company is also considering taking out a loan and buying a small truck to save costs on deliveries. The truck costs $60000 and is expected to earn end of year after tax net cash inflows of $11000, $17000, $20000 and $20000 for the next four years before it wears out sufficiently to be unreliable and must be sold for an estimated $18000 (after tax).                                                      a) Calculate the NPV of the truck if the interest rate on the loan is 4.0% pa.                                                    Year Transactions Cost flow PV Factor at 4% Discounted cash flows 0 Cost (60,000) 1 (60,000) 1 After-tax net cash inflows 11,000 0.9615 10,577 2 After-tax net cash inflows 17,000 0.9246 15,718 3 After-tax net cash inflows 20,000 0.8890 17,780 4 After-tax net cash inflows 20,000 0.8548 17,096 4 Realizable value after tax 18,000 0.8548 15,386…