What is the annual after-tax cash flow for bavarian brew

Assignment Help Finance Basics
Reference no: EM132528660

Bavarian Brew wants to lease a new bottling machine. The company obtains a 10-year lease requiring annual payments of $15 000 at the beginning of the year. The company is expected to exercise its option to purchase the machine at the termination of the lease for $10 000 at the end of year 10. The company is in the 35% tax bracket.

a. What is the annual after-tax cash flow for Bavarian Brew from the lease?

b. Bavarian Brew has the option to purchase the machine. If the present value of the cash flows associated with the purchase is $78 000, what is the net present value of the lease option? Assume that the company's cost of debt is 7%

Reference no: EM132528660

Questions Cloud

What is abc inc break-even point in units : What is ABC Inc break-even point in units?Selling price per unit (package of 2 CDs),Forecasted annual sales volume (120,000 units)
Determine what is the company contribution margin ratio : Determine What is the company contribution margin ratio?Variable costs per unit,Forecasted annual sales volume (120,000 units)
Demonstrate the cost formula that expresses the behaviour : The relevant range of operations is between 2 500 units and 10 000 units,Determine the cost formula that expresses the behaviour of Yang's total costs.
Explain the empirical approach to measure managerial : Explain the empirical approach to measure managerial overconfidence. Also, explain the underlying reasons/mechanisms why it works
What is the annual after-tax cash flow for bavarian brew : Bavarian Brew has the option to purchase the machine. If the present value of the cash flows associated with the purchase is $78 000, what is the net present va
Determine technical engineering variable cost per copy : Determine Technical Engineering's variable cost per copy. Technical Engineering presently leases a copying machine on a monthly basis.
Make an investment decision of project : Make an investment decision of this project by providing calculations:
What is abc inc contribution margin : What is ABC Inc.'s contribution margin?Selling price per unit (package of 2 CDs),Total variable costs per unit,Forecasted annual sales volume (120,000 units)
Taxes on net short-term and long term capital gains : Assuming that investors pay taxes on net short-term and long term capital gains at the end highest rate, calculate the tax cost ratio.

Reviews

Write a Review

Finance Basics Questions & Answers

  What percentage return do you earn on the investment

Explain what percentage return do you earn on the investment - During the year the company distributes $ 0.75 in dividends

  Find the accumulation of the annuity at the end of 12 years

Find the accumulation of the annuity at the end of 12 years.

  The court of law to accuse the former manager

The computers Pty Ltd has no chance under the court of law to accuse the former manager for soliciting funds from the customers, if the manager does not use the name of the company that is the Pty Ltd for soliciting customers then the customers shoul..

  Examine and discuss the characteristics of npv and the role

Examine and discuss the characteristics of NPV and the role that this method plays in capital investment decision making.

  Scheuer enterprises consists of a beta of 110 the real

scheuer enterprises has a beta of 1.10 the real risk-free rate is 2.00 investors expect a 3.00 future inflation rate

  Explain intuitively why equity holders make this decision

In three sentences or less, explain intuitively why equity holders make this decision

  First payment will be received today

Assume you are to receive a 10-year annuity with annual payments of $312. The first payment will be received today (that is, at t = 0) and the last payment.

  Consider another all-equity firm

Consider another all-equity firm that does not pay taxes due to large tax loss carry-forwards from previous years. The personal tax rate on interest income is 15 percent, and there are no costs of financial distress.

  Does it affect the closing entries and financial statements

What happens if an adjusting entry is not made? Does it affect the closing entries and financial statements? If so, how and what can be done to rectify this problem?

  Desire of investors for current income

Explain why this argument does/does not work in a perfect capital market with no transaction costs. Explain how this argument does/does not work in real life.

  Explain why the profit margin for banquets is considerably

Explain why the profit margin for banquets is considerably higher than that of hotel restaurants.

  What is the cost of equity capital for acme tool

Acme Tool is an all-equity firm (i.e. it has no debt financing) with abeta of 1.25.If the risk-free rate is 4.5% and the market risk premiumis 9% (the expected return in the market is 13.5%), what is the cost of equity capital for Acme Tool.

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