The firm wants to obtain new equipment via capital lease

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Reference no: EM131859587

1. Fresh Fish has assets valued at $1.2 million and equity of $.98 million. The firm wants to obtain new equipment via a capital lease. The equipment costs $200,000 and the present value of the lease payments is $175,000. With the lease, firm’s balance sheet will show assets of ____and liabilities of ____.

$1,400,000; $1,400,000

$1,400,000; $1,155,000

$1,400,000; $1,180,000

$1,375,000; $1,375,000

$1,375,000; $1,155,000

2. A new robotic welder can be leased for 3 years with annual payments of $225,000 with the first payment occurring at lease inception. The system would cost $850,000 to buy and would be depreciated straight-line to a zero salvage value over five years. The actual salvage value is $65,000 at the end of the five years. The firm can borrow at 8 percent and has a tax rate of 34 percent. What is the Year 0 incremental cash flow from leasing instead of buying?

948,000

695,000

701,500

561,000

850,000

Reference no: EM131859587

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