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.

User Account

All Pages