Cheaper on per-year basis than leasing machine

Assignment Help Financial Management
Reference no: EM131937325

A small real estate office needs a new copier. They have their choice between leasing a new copier for $2,000 per year with all maintenance included or they can purchase their own copier for $4,200 and would incur $1,200 per year in operating costs. Paper and cartridge costs for the copier would be identical in either case. The lease would be for a total of 6 years and the copier, if bought, would have a useful life of 6 years and no expected salvage value at the end of that time. Determine if owning the machine would be cheaper on a per-year basis than leasing the machine. Then firm’s tax rate is 34% and the proper required rate of return for the project would be 7%.

Reference no: EM131937325

Questions Cloud

According to the interest rate parity theory : If the interst rate in Great Britain remains 2.5%, what should the interest rate be in the U.S. according to the interest rate parity theory?
Division will be financed with similar mix of debt-equity : Multi-Foods is financed 50% by debt and 50% by equity which is company target capital structure. Each division will be financed with similar mix of debt-equity.
Choice assuming they both would perform the required tasks : which model would be the best choice assuming they both would perform the required tasks?
What is the total value of the company using the APV model : What is the total value of the company, using the APV model?
Cheaper on per-year basis than leasing machine : Determine if owning the machine would be cheaper on a per-year basis than leasing the machine.
Use either replacement chain or EAA and EAC analysis : You are free to use either replacement chain or EAA/EAC analysis.
Expected value of forward and money market hedges : Calculate the expected value of the forward and the money market hedges and make a recommendation.
Statements regarding loanable funds theory is correct : Which of the following statements regarding loanable funds theory is CORRECT?
Compute NPV and IRR of investment : Given that the firm’s required rate of return is 13%, compute the NPV and IRR of the investment. Should they make the investment?

Reviews

Write a Review

Financial Management Questions & Answers

  What are the portfolio rate of return and variance values

What are the portfolio rate of return and variance values?

  Noninterest-bearing debt

While reading a recent issue of Health & Fitness , a trade journal, Brandon Wilde noticed an ad for equipment he had been seeking for use in his business.

  Find zero coupon bond-what is the price of the bond

If the yield to maturity on this bond is 5.6 percent, what is the price of the bond?

  Financial arrangement

Firms A , B , C and D enter into a financial arrangement. Money flush firm A will pay expanding firms B and C each $1,000,000 today.

  What is the unlevered value of the firm

Forbidden Fruit Extracts expects its earnings before interest and taxes to be $325,000 a year forever. Currently, the firm has no debt. The cost of equity is 16.3 percent and the tax rate is 35 percent. The company is in the process of issuing $2 mil..

  Calculate operating cash flow-dividend and retained earnings

Building an Income Statement.  Fyre, Inc., has sales of $625,000, costs of $ 260,000, depreciation expense of $79,000, interest expense of $43,000, and a tax rate of 35 percent. What is the net income for this firm? Also, calculate operating cash flo..

  Hree portfolios the market portfolio and the risk-free asset

Consider the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio RP σP βP X 14.0 % 31 % 1.35 Y 13.0 26 1.10 Z 7.0 14 .75 Market 10.2 19 1.00 Risk-free 6.0 0 0 What is the Sharpe ratio, Treynor r..

  Using the following certainty equivalent coefficients

Using the following certainty equivalent coefficients (CECs) and risk-free interest rate 6%, compute the certainty equivalent NPV (E(NPV)):CEC1 = 0.8, CEC2 = 0.8, CEC3 = 0.6, and CEC4 = 0.6.

  What is the overall expected return of the portfolio

An analyst for ABC company has developed the following distribution for the next year: State of the economy Probability Stock’s Return Mild Recession 25% -9% Moderate growth 55% 11% Expansion 20% 16% What is the expected return of ABC stock for the n..

  Common views of compensation shared by employees

Identify and explain any common views of compensation shared by employees, employers, and society.

  Black-scholes option pricing model-what is options value

Black-Scholes Model Assume that you have been given the following information on Purcell Industries: Current stock price = $15 Strike price of option = $14 Time to maturity of option = 6 months Risk-free rate = 8% Variance of stock return = 0.11 d1 =..

  Knowledge of managerial finance

What industry is your company part of? Who are some of the company's primary competitors? What doe the future look like for this industry - The current ratio indicates the extent to which current liabilities are covered by those assets that are exp..

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