Determine the present value for the options

Assignment Help Corporate Finance

Reference no: EM13332950

Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corp. The machine can be used for 12 years and then sold for $11,000 at the end of its useful life. Lollie has presented Kiddy with the following options

1. Buy machine. The machine could be purchased for $161,000 in cash. All maintenance and insurance costs, which approximate $6,000 per year, would be paid by Kiddy.

2. Lease machine. The machine could be leased for a 12-year period for an annual lease payment of $26,000 with the first payment due immediately. All maintenance and insurance costs will be paid for by the Lollie Corp. and the machine will revert back to Lollie at the end of the 12-year period.

Assuming that a 11% interest rate properly reflects the time value of money in this situation and that all maintenance and insurance costs are paid at the end of each year, find the present value for the options. Ignore income tax considerations.

Reference no: EM13332950

Questions Cloud

Discuss importance and explain use of business process : Discuss the importance and explain the use of business process modeling notation (BPMN).

Obtain the average force exerted on the ball by the bat : A baseball (m = 145 g) approaches a bat horizontally at a speed of 40.5 m/s (91 mi/h) and is hit straight back at a speed of 45.9 m/s, what is the average force exerted on the ball by the bat

Calculate amount at which barrett should record note payable : On January 1, 2013, The Barrett Company purchased merchandise from a supplier. Payment was a noninterest-bearing note requiring five annual payments of $32,000 on each December 31 beginning on December 31, 2013

Calculate the of each of the following solutions : Solve an equilibrium problem (using an ICE table) to calculate the of each of the following solutions. 1) 0.12 M HF pH = ? 2) a mixture that is 0.12 M in HF and 0.12 M in NaF Explain And show work please

Determine the present value for the options : Assuming that a 11% interest rate properly reflects the time value of money in this situation and that all maintenance and insurance costs are paid at the end of each year, find the present value for the options.

Explain two substances in order of decreasing melting point : Choose the answer which presents the chemical formulas for two substances in order of decreasing melting point (highest melting point first) and gives a valid reason for this order.

Design pattern for web based database interfaces : We have implemented the MVC design pattern for Web based database interfaces. However, there are other design patterns that may be directly applicable to PHP programming, or web programming in general.

Explain naf > mgf2 due to the lower molar mass of naf : NaF > MgF2 due to the lower molar mass of NaF. d) Si > SiF4 due to covalent-network bonding in Si, versus dispersion forces in SiF4. e) SiO2 > SeO2 due ionic bonding in SiO2 but not in SeO2.

What is the dead weight loss generated : Consider a monopolist facing a demand curve given by P = 20 – q, where P is the market price and q is the quantity sold. The monopolist's marginal costs are MC = 2 per unit; there are no other costs.

User Account

All Pages