Graph the eac for the purchase for financing fractions

Reference no: EM132168902

Question: For Problem, assume that the machine will be financed with a 4-year loan whose interest rate is 12%.

(a) Graph the EAC for the purchase for financing fractions ranging from 0% to 100%.

(b) Assume that 50% bonus depreciation is also available. Graph the EAC for the purchase for financing fractions ranging from 0% to 100%.

(c) Assume that Section 179 depreciation must be considered, as this is LoTech's only major equipment investment this year. Also assume that the firm is profitable. Graph the EAC for the purchase for financing fractions ranging from 0% to 100%.

Problem: LoTech Welding can purchase a machine for $175,000 and depreciate it as 5-year MACRS property. Annual maintenance would be $9800, and its salvage value after 8 years is $15,000. The machine can also be leased for $35,000 per year on an "all costs" inclusive lease (maintenance costs included). Lease payments are due at the beginning of each year, and they are tax-deductible. The firm's combined tax rate for state and federal income taxes is 40%. If the firm's after-tax interest rate is 9%, which alternative has the lower EAC and by how much?

Reference no: EM132168902

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