Calculate the npv of leasing for south and superlease

Assignment Help Financial Management
Reference no: EM131899696

South Inc. is a manufacturing firm that needs a new machine for its operation. It can either purchase the machine for $375,000 or lease it from SuperLease Inc. for 20 annual lease payments (paid at the beginning of the year) of $28,000. The machines has economic life of 20 years and CCA rate of 20%. The salvage value depends on whether it is owned by South or SuperLease. Since SuperLease has a better access to the resale market, the salvage value is expected to be $12,500, which is $2,500 more than the salvage value if South owns it. SuperLease does not have any other asset in the asset class and South always has a positive UCC in the asset class. The costs of debt for South and SuperLease are 10% and 7% respectively. The tax rates for South and SuperLease are 25% and 20% respectively. a. Calculate the NPV of leasing for South and SuperLease. b. What is the range of annual lease payments that makes leasing acceptable to both of them?

Reference no: EM131899696

Questions Cloud

Create an application role named midtermapp : Create an Application Role named MidtermApp, and give it your default password. Create the following users and groups on the local Windows Server.
Think about your daily life and what symbols you notice : Think about your daily life and what symbols you notice. Think about what these symbols can mean to you
Analyze process for ease-usefulness and potential value : Visit alibaba, go to "Advanced Search,"and enter the product you seek in the relvent box.Select required criteria and click on "search".
What are some of the negative stereotypes : What are some of the negative stereotypes that older adults have that might influence their help seeking behavior?
Calculate the npv of leasing for south and superlease : Calculate the NPV of leasing for South and SuperLease. What is the range of annual lease payments that makes leasing acceptable to both of them?
Calculate the price of six-month call option : calculate the price of a 6-month call option on West’s stock that has an exercise price of $27.
Is the presentation effective from the visual aids : View the presentation "What Non-Profits can learn from Coca-Cola" at the link below in attached file.
What state has the most people per senate seat : What state has the MOST people per Senate seat? What TWO powers are granted to the judicial branch besides reviewing lower-court decisions
Implies necessarily that project is profitable : Which of the below implies necessarily that a project is profitable? In a mature VC firm, all the activities in investing cycle will be occurring at same time.

Reviews

Write a Review

Financial Management Questions & Answers

  Project for ultimate recreational tennis racket

You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand.

  What would her tax liability be for the year

Mary has earnings of $50,000 this year from her job. In addition, the market value of the condominium she owns increased from $100,000 to $105,000. She has no other capital gains or earnings, and receives no transfers. If Mary was subject to a compre..

  What is the intrinsic price of the stock

The University Building Company has fallen on hard times. Its management expects to pay no dividends for the next 3 years. However, the dividend for Year 4 will be $3.50 per share, and the dividend is expected to grow at a rate of 2 percent for Year ..

  Expected return on the asset-market risk premium

Consider an asset that has a beta of 1.20. If the risk-free rate is 2.0% and the market risk premium is 3%, expected return on the asset is: Assume that you are a U.S. investor who is considering investments in the German (Stocks A) and British (Stoc..

  Assume annual compounding

An investment of $20,000 grows into $35,000 over a period of 7 years. What is the APR? when compounding period is not given, we assume annual compounding.?

  What is the payback period for the project

Suppose Palmer Properties is considering investing $2.6 million today (i.e., C0 = -2,600,000) on a new project that is expected to last for 7 years. What is the payback period for the project? Show your work. What is the net present value of the proj..

  Annual and future equivalent of its fuel costs

If the plant has a remaining useful life of 7 years, what is the present, annual and future equivalent of its fuel costs?

  What is the net present value of this project

You purchased land 3 years ago for $60000 and believe its market value is now $90000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $150000, an expense that you plan to depreci..

  One-year zero-coupon bonds and perpetuities

how much of its portfolio should it allocate to one-year zero-coupon bonds and perpetuities, respectively, if these are the only two assets funding the plan?

  What is the minimum acceptable expected return for stock

what is the minimum acceptable expected return for this stock based on your requirements?

  What is value of the option to wait

Hickock Mining is evaluating when to open a gold mine. The mine has 37,200 ounces of gold left that can be mined, and mining operations will produce 6,200 ounces per year. The required return on the gold mine is 10 percent, and it will cost $34.2 mil..

  Discuss the relations among net income

Discuss the relations among net income, non-working capital adjustments, working capital adjustments, operating cash flows

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd