What are the required annual beginning-of-year lease payment

Assignment Help Financial Management

Reference no: EM131079571

Ajax Leasing Services has be approached by Gamma Tools to provide lease financing for a new automated screw machine. The machine will cost $220,000 and will be leased by Gamma for five years. Lease payments will be made at the beginning of each year. Ajax will depreciate the machine on a straight line basis of $44,000 per year down to a book salvage value of $0. The actual salvage value is estimated to be $30,000 at the end of the five years. Ajax’s marginal tax rate is 40%. Ajax desires to earn a 12% after-tax return on this lease. What are the required annual beginning-of-year lease payments?

Reference no: EM131079571

Questions Cloud

What is the companys cost of equity capital : The Graber Corporation’s common stock has a beta of 1.1. If the risk-free rate is 5.1 percent and the expected return on the market is 13 percent, what is the company’s cost of equity capital?

Find the value of a european call option with : Find the value of a European call option with:

To what value does this series converge when t = 1 : To what value does this series converge when t = 1

Characteristics of public goods : What are the characteristics of public goods? Give example and state one reason of such goods.

What are the required annual beginning-of-year lease payment : Ajax Leasing Services has be approached by Gamma Tools to provide lease financing for a new automated screw machine. The machine will cost $220,000 and will be leased by Gamma for five years. What are the required annual beginning-of-year lease payme..

Additional unit of an activity : What do we call the increase in the total cost which results from carrying out one additional unit of an activity?

Repaid by the amortization method with an installment : A loan is being repaid by the amortization method with an installment at the end of each of 80 quarters at 6% annual effective interest, the first payment one quarter after the loan is made. In which payment are the principal and the interest most ne..

Average balance in accounts payable and accounts receivable : Calvani, Inc., has a cash cycle of 47 days, an operating cycle of 70 days, and an inventory period of 30.5 days. The company reported cost of goods sold in the amount of $349,000, and credit sales were $572,000. What is the company’s average balance ..

Demand and a change in quantity demanded : 1. Why is a point below the production possibilities curve less efficient than a point on that curve? 2. Distinguish a change in demand and a change in quantity demanded. What are the causes of change in demand and quantity demand?

User Account

All Pages