Reference no: EM133056271
In the question below, the firm is purchasing a cash register system for $1,079,861.
As a consultant, you were asked to evaluate a lease versus buy analysis on the purchase of a new front end cash register system for a clothing store called More Clothes.
The cost of the front end system was given in the first question.
The owners of the store will obtain a loan for 8% for the full amount of the system. The loan would be amortized over the 5-year life of the system, with payments made at the end of each year. The system is classified as a special purpose; hence, it falls into the MACRS 3-year class with depreciation rates of (33%; 45%, 15%, and 7%).
If the system is purchased, a maintenance contract will be obtained for $30,000, payable at the start of each of the next 4 years. The firm will upgrade the system at the end of four years and sell the current system for $95,000.
As an alternative, ABC Leasing will write a 4-year lease on the system, including maintenance, for payments of $325,000 at the beginning of each year. The firm's marginal federal plus state tax rate is 35%.
On an Excel spreadsheet, compute the net advantage to leasing.
Clearly note the following on the Excel spreadsheet:
- Initial cost of owning
- Year one operating cash flow of owning
- Net sale price (if owned)
- Cost of Owning
- Cost of capital used to evaluate project
- Operating cost in year 1 associated with leasing
- Cost of Leasing
- Net advantage (disadvantage) of leasing
|
Current loan application process
: Despite a strong digital marketing approach, the current loan application process remains manual. All applications are reviewed and approved
|
|
How is the gain from life insurance settlement
: The president of DEF Company died on September 30, 20x5. How is the gain from life insurance settlement upon death of the officer
|
|
What is the 6 month forward price
: The current spot price for wheat (per ton) is $165. Given a riskless rate of 3%p.a. and a 2.5%p.a. storage cost, what is the 6 month forward price?
|
|
Describe five different leadership functions
: Given the fundamental value placed on leading with purpose, briefly c/situations (e.g., evaluating the school budget, student discipline, teacher observation/ev
|
|
Compute the net advantage to leasing
: In the question below, the firm is purchasing a cash register system for $1,079,861.
|
|
Representatives from nonprofit organizations
: As office manager for the Vancouver Humane Society (www.vancouverhumanesociety.bc.ca), an organization that rescues and finds homes for abandoned and abused ani
|
|
Making foreign goods cheaper in country
: (a) Is the following statement true or false? (Please just state "True" or "False" without providing explanations.) "Policymakers may not want to see their coun
|
|
Compute the budgeted and actual cost rate
: The 2019 actual assembly support costs were $7,084,000, while the actual direct labour hours were 161,000. Compute the (a) budgeted and (b) actual cost rate
|
|
What amount does the firm need to deposit today
: Kelowna Inc. reports a $67,500 liability to be paid four years from today. What amount does the firm need to deposit today
|