A company must install $1.5 million of new equipment. It can get a loan for 100% of purchase price or lease the equipment.
-The equipment falls into the MACRS 3-yr class.
-Maintence expenses are $75,000 per year, payable at the beginning of each year.
-Tax rate is 40%
-Lease payments are $400,000 payable at the end of each year for 4 years.
-The company will keep the equipment past the expiration of the lease and will purchase it at its residual value of of $250,000 at the end of the 4th year.
I've been working on the problem for 3 days and cannot get to a (net advantage to leasing) NAL of $37,206. File attached showing my work.
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I have done the calculations in sheet 2 to get the NAL of $37,206. The errors in your calculation were
1. Time period should be 4 years since the question says lease payments would be for 4 years and also the depreciation is for 4 years.
2. When you use the ...
The solution explains how to do a lease analysis and calculate the NAL of the lease.
Case Study and Analysis
I need help with the following, using the case attached. The spreadsheet can be found using the link below.
1. Read Case 18: Portland Cancer Center on page 135 in the Cases in Healthcare Finance text.
2. Assume that you have been hired as a consultant to recommend a course of action for the Gamma Knife acquisition. Prepare a report that addresses all of the issues raised by the parties involved and make a final recommendation regarding the acquisition.
3. You are welcome to take advantage of the student spreadsheet models for this case at http://www.ache.org/books/FinanceCases4.