Determine the net advantage to leasing

Reference no: EM131977791

Question: Green Valley Farms is considering either leasing or buying some new farm equipment. The lessor will charge $18,000 a year lease. The purchase price is $58,000. The equipment has a 3-year life after which time it will be worthless. Green Valley Farms uses straight-line depreciation, has a 32 percent tax rate, borrows money at 9 percent, and has sufficient tax loss carryovers to offset any potential taxable income the firm might have over the next five years. What is the net advantage to leasing?

Reference no: EM131977791

Questions Cloud

Estimate the bond duration and convexity : Estimate the bond’s duration and convexity. Estimate the new bond prices using the duration adjustment when the annual yield changes by 1% and -0.5%.

What is the sustainable rate of growth : The Green Giant has a 5 percent profit margin and a 36 percent dividend payout ratio. The total asset turnover is 1.4 and the equity multiplier is 1.4.

Choosing cost drivers for allocating costs to products : Give three criteria for choosing cost drivers for allocating costs to products.

Identify the stakeholders change agents : Develop an initial reference list to assure that there is adequate literature to support your evidence-based practice project

Determine the net advantage to leasing : Green Valley Farms is considering either leasing or buying some new farm equipment. The lessor will charge $18,000 a year lease. The purchase price is $58,000.

Find the times-interest-earned ratio : Graser Trucking has $16 billion in assets, and its tax rate is 40%. Its basic earning power (BEP) ratio is 12%, and its return on assets (ROA) is 3%.

Find what is the current bond price : Great Wall Pizzeria issued 7-year bonds one year ago at a coupon rate of 6.5 percent. If the YTM on these bonds is 8.6 percent, what is the current bond price?

Each of the four terminal value assumptions : Calculate VT and V0 under each of the four terminal value assumptions. Forecast this property’s NOI over Caden’s expected holding period.

Calculate the npv and irr of investment : Calculate the NPV and IRR of this investment under each of the four terminal value assumptions discussed in class.

User Account

All Pages