Reference no: EM1316185
Explain taxes, Leasing, and the time value of money
(Leasing, taxes, and the time value of money) The lessor can claim the tax deductions associated with asset ownership and realize the leased asset\'s residual value. In return, the lessor must pay tax on the rental income.
a. Explain why a financial lease represents a secured loan in which the lender entire debt service stream is taxable as ordinary income to the lessor/lender.
b. In view of this tax cost, what tax condition must hold in order for a financial lease transaction to generate positive net-present-value tax benefits for both the lessor and lessee?
c. Suppose the lease payments in Table 21-2 must be made in advance, not arrears. (Assume that the timing of the lease payment tax deductions obligations changes accordingly but the timing of the depreciation tax deductions does not change). Show that the net advantage to leasing for NACCO must decrease as a result. Explain why this reduction occurs.
d. Show that if NACCO is nontaxable, the net advantage to leasing is negative and greater in absolute value than the net advantage of thelease to the lessor.
e. Either find a lease rate that will give the financial lease a positive net advantage for both lessor and lessee, or show that no such leaserate exists.
f. Explain what your answer to part e implies about the tax costs and tax benefits of the financial lease when lease payments are made 10in advance
|
Computation of return on stock using capm approach
: Computation of return on stock using CAPM approach - Other things held constant, if the expected inflation rate decreases and investors also become more risk averse, the Security Market Line would shift
|
|
Iindependence of attributes by chi-square test
: What is your conclusion? Are the two variables independent?
|
|
The possibility that nucleus will be disintegrated the end
: The number of bombardment necessary to achieve the disintegration of a certain nucleus is assumed to have the distribution above. In one sequence in which b bombardments are available, of these have already failed to disintegrate the nucleus. What..
|
|
Elimination or substitution methods
: Elimination or substitution methods
|
|
Explain taxes, leasing and the time value of money
: Explain taxes, Leasing and the time value of money and explain why a financial lease represents a secured loan in which the lender entire debt service stream is taxable as ordinary income to the lessor/lender
|
|
Nick uses the equally likely criterion
: Assume Nick doesn't know how his received he suppose that all three states of nature are equally likely to occur. If Nick uses the equally likely criterion illustrate what decision would he make.
|
|
Valuation of stock using capm
: Valuation of stock using CAPM - Estimate the value of Cargo Point, Inc. stock.
|
|
Problem on central limit theorem area under a curve
: The manufacturer of a coffee dispensing machine claims the ounces per cup is normally distributed with population mean equal to 8 ounces and standard deviation equal to 0.9 ounces. If 50 cups of coffee were measured, what is the possibility that- ..
|
|
Various costs and change in costs
: Point out how each of the following would shift the 1) average-variable-cost curve, 2) average-fixed-cost curve, and 3) average-total-cost curve. Mention two types of businesses that their costs are mostly variable costs, and list 2 types of busin..
|