Solution-What is the net advantage to leasing in thousands

What is the net advantage to leasing in thousands

Assignment Help Managerial Accounting

Reference no: EM132985153

Problem 1: To finance some manufacturing tools it needs for the next 3 years, Waldrop Corporation is considering a leasing arrangement. The tools will be obsolete and worthless after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life. It can borrow $4,800,000, the purchase price, at 10% and buy the tools, or it can make 3 equal end-of-year lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year. The firm's tax rate is 25%. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases. What is the net advantage to leasing (NAL), in thousands? (Suggestion: Delete 3 zeros from dollars and work in thousands.)

a. $153
b. $139
c. $146
d. $119
e. $132

Reference no: EM132985153

Questions Cloud

Find what is the horizon value of the interest tax shield : What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent.

How does a company manage uncertain events that may be : How does a company manage uncertain events that may be (and usually are) out of their control? However, this does not mean that a company is helpless

What will the payout ratio be for silvana inc : Capital budget $850,000. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be?

Compute the departmental overhead rate and amount of applied : Compute the departmental overhead rate and amount of applied overhead for Department A using direct labor hours as the allocation base

What is the net advantage to leasing in thousands : To finance some manufacturing tools it needs for the next 3 years, What is the net advantage to leasing (NAL), in thousands?

What percentage of the capital budget must be financed : It is committed to maintaining a $2.00 dividend per share. Given these constraints, what percentage of the capital budget must be financed with debt?

Term Paper - The Rookie Chief Information Security Officer : Term Paper - The Rookie Chief Information Security Officer. Develop a Request for Proposal (RFP) plan to solicit qualified vendors

Calculate the taxable capital gain : Calculate the taxable capital gain and/or allowable capital loss to be included in income by Mrs. Landlord, as a result of the sale of Building B

Standard deviations of the numbers imperfections : The distribution of the number of imperfections per 10 meters of synthetic failure is given by:

User Account

All Pages

What is the net advantage to leasing in thousands

Reference no: EM132985153

Reference no: EM132985153

Questions Cloud

Reviews

Write a Review

Managerial Accounting Questions & Answers

Manage budgets and financial plans

Prepare a retained earnings statement

Prepare a master budget for the three-month period

Construct the companys direct labor budget

Evaluate the predetermined overhead rate

Determine the company''s bid

Compute the pool rates for the different activities

Prepare Company financial statements

Prepare an analysis of terracycles

Discuss the ethical issues

Political resources in emerging markets

Management accounting - ehsan electronics company

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT