User Account

All Pages

Which option is better to buy or to lease

Assignment Help Accounting Basics
Reference no: EM131789273

Problem

Partex Ltd. is considering the purchase of new laser technology. The equipment can be purchased for $500,000 and is expected to last 5 years. At the end of its life the machine can be sold for scrap parts and should generate $50000 in revenue. Parted has also been advised that the service contract on the new equipment will cost $2000 per month. If Partex decides not to undertake the service contract there will be no warranty of the new equipment.

Another option is to lease the new equipment for $12,500 per month; no other cost is incurred, as the lease includes the service contract.

If Partex can earn 8%, compounded annually, which option is better - to buy or to lease?

I already understand how to get to the present value of the lease payments. I'm having trouble with the first part of the question.

Reference no: EM131789273

Questions Cloud

What is the journal entry to record establishing the account : Ferguson Co. decides to establish a petty cash fund with a beginning balance of $310. What is the journal entry to record establishing the account.
Prepare the entry to record depreciation : Depreciation has been entered for 7 years on a straight line basis. Prepare the entry to record depreciation for 2013
Examine the complex relationships in privilege and racism : In many societies certain groups possess more resources and hold more power than other groups.
Which machine is more profitable to run on a daily basis : Machine A makes 100 boards per hour in a 16-hour production day Raw material costs $8 per board, and there is no scrap of any boards during production.
Which option is better to buy or to lease : Partex Ltd. is considering the purchase of new laser technology. If Partex can earn 8%, compounded annually, which option is better - to buy or to lease?
What are key components of a food safety program : What two techniques can be used to ensure the frozen vegetables remain frozen during storage - What are four key components of a food safety program?
Compute the post retirement benefit expense : Englehart Co. provides the following information about its post-retirement benefit plan for the year 2012. Compute the post retirement benefit expense for 2012
Number of millions of social security beneficiaries : Social Security beneficiaries the graph shows a model for the number of millions of Social Security beneficiaries projected to 2030.
Journalize the transactions in a four-column cash payments : Journalize the transactions above in a four-column cash payments journal with columns for Other Accounts Dr., Accounts Payable Dr., Inventory Cr., and Cash Cr.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Theory of interest - term structure of interest rates

Term Structure of Interest Rates

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd