Free cash flow consequences of buying the fabricator

Assignment Help Financial Management

Reference no: EM132070579

Craxton Engineering will either purchase or lease a new $752,000 fabricator. If purchased, the fabricator will be depreciated on a straight-line basis over seven years. Craxton can lease the fabricator for $129,000 per year for seven years. Craxton's tax rate is 35%. (Assume the fabricator has no residual value at the end of the seven years.)

a. What are the free cash flow consequences of buying the fabricator if the lease is a true tax lease?

b. What are the free cash flow consequences of leasing the fabricator if the lease is a true tax lease?

c. What are the incremental free cash flows of leasing versus buying?

Reference no: EM132070579

Questions Cloud

What is the current market price of these bonds : The bonds have a yield to maturity of 5%. What is the current market price of these bonds?

Estimate the value of the firm : L & Co. is a manufacturing company which reported earnings before interest and taxes of $150 million this year. Estimate the value of the firm.

Research article or two on food production-manufacturing : Research an article or two on food production and manufacturing, plus any health care production items sold in a retail grocery store.

Create a gantt chart for the given project : Set a start date of September 1, 2018. Assume that work can be done 5 days per week, with no work done on Saturdays or Sundays.

Free cash flow consequences of buying the fabricator : What are the free cash flow consequences of buying the fabricator if the lease is a true tax lease?

Find a small usa based company : Find a small USA based company and describe the following:

What are the importan skills needed project management : This extraordinarily improves the probability of his project meeting or the expectations of external stakeholders (Kerzner, 2013).

How much would it cost her to buy the annuity today : he going rate on such annuities is 5.25%. How much would it cost her to buy the annuity today?

What kinds of problems do management scientists face : When is management science generally applied? What kinds of problems do management scientists face? Provide an example of a management science.

User Account

All Pages