Find the minimum annual lease payment required by lessor

Assignment Help Finance Basics
Reference no: EM132610941

Lessee Inc. can either purchase a machine for $65,000 or lease it from Lessor for $9,100 per year (paid at the beginning of each year) for 8 years. The machine will have a salvage value of $5,850 at the end of year 8. The CCA rate is 40% and the machine is the only asset in the asset class for Lessee. Assume Lessee's cost of borrowing is 5% and its tax rate is 35%. What is Lessee's NPV of leasing? What is Lessee's maximum annual lease payment? Assume that Lessor has many other assets in the asset class with UCC of $9,009.24 at year 8, tax rate of 40% and cost of borrowing of 8%, find the minimum annual lease payment required by Lessor.

Reference no: EM132610941

Questions Cloud

Record the transactions in journal : Question - Mr. Bernard is a trader buying and selling specialist office furniture. Record the transactions in Journal. Prepare necessary ledger accounts
Explain and comparing christianity and islam : Comparing/contrasting Christianity and Islam. What are the central assumptions for each worldview/religion? How are they similar?
Program using the basic architectures to control robots : Understanding the subject specific issues relating to programming mobile robots and Understanding and being able to program to execute navigation, sensor data
What recommendations would you make to improve the systems : Do you think your organization's performance management, compensation, benefits, and payroll systems are effective? Why or why not? What recommendations would.
Find the minimum annual lease payment required by lessor : Lessee Inc. can either purchase a machine for $65,000 or lease it from Lessor for $9,100 per year (paid at the beginning of each year) for 8 years.
Explain the central assumptions of postmodern worldview : Discussing the central assumptions of the postmodern worldview. What is postmodernism? How does it effect the way people live?
Compute the amount of interest that must be accrued : Harris Pilton borrowed $15,000 on a 90-day, 5% note payable on October 19th, 2020. Compute the amount of interest that must be accrued
Explain and contrasting pantheism and new age thought : Comparing/contrasting pantheism and new age thought. What are the central assumptions for each worldview? How are they similar? How do they differ?
Recommend a plan that centers on total quality management : Imagine your company is being considered for subcontracting the management of a project because of your firm's excellent human resource and quality management.

Reviews

Write a Review

Finance Basics Questions & Answers

  Write a formula for tax revenues as a function of tax rate

In an economy the supply curve of labor, S, is given by S = -100 + 200wn.

  Discounting cash flows on investments

Frank Zanca is considering three different investments that his broker has offered to him.

  What is your rate of return if the stock sells

Assume you purchased the right to sell 2,000 shares of JC Penney stock in January 2013 at a strike price of $27 per share. Suppose the stock sells for $25 per.

  Determine the amount of average inventory

McKinnley Company is constructing a plan to finance its asset base. The firm has $5,000,000 in current assets, of which 20 percent are permanent, and $12,000,000 in fixed assets.

  Define working capital net working capital net operating

Define each of the following terms:a. Working capital; net working capital; net operating working capital b. Inventory conversion period; receivables collection period; payables deferral period; cash conversion cycle.

  What estimate can he make of the real rate of return

On the basis of the information that Carl has collected, what estimate can he make of the real rate of return?

  Identify a firm major capital structure components

Identify a firm's major capital structure components? Differentiate between: book, market and target value capital structure?

  Find the price of a call option on the stock

The current price of a stock is $15. In 6 months, the price will be either $18 or $13. The annual risk-free rate is 6 percent. Find the price of a call option on the stock that has an exercise price of $14 and that expires in 6 months.

  Businesses interact with and manage their supply chain

Conduct research online to identify the various ways in which businesses interact with and manage their supply chain. Discuss the steps that occur during the procurement process and the types of procurement that occur in business-to-business (B2B)..

  Calculate the actual realized rate of return

An investor pays $800 for a $1000 par bond carrying 5% coupon rate (coupon payments made semi-annually) during a period of economic stress.

  Explain the strengths and weaknesses of each rating

In your own words and using various bond websites, please locate one of each of the following bond ratings. Explain the strengths and weaknesses of each rating.

  Construct a table of the relevant cash flows for the project

Consider a project that involves the purchase of a $100,000 machine. The machine will last for three years. It is expected to produce 20,000 units per year.

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