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Capital Lease vs Operating Lease

1. What do I mean when I say to match the type of financing with the useful life of the asset? 2. What is the difference in a Capital Lease and an Operating Lease? When is one more useful over another? For the second example, do you want just definition or want us to provide examples? Thank you. Examples would be wonderful

Financing Strategy and Valid Leasing Statements

14.11 The Cable Company has $1 million of positive NPV projects it would like to take advantage of. If Cable's managers follow the historical pattern of long-term financing for U.S. industrial firms, what will their financing strategy be? 21.1 Discuss the validity of each of the following statements. Leasing reduces risk

Break-even, Net Income target, MOS

Fruit-Pit Company produces a single product. The results of the company's operations for a typical MONTH are presented in contribution format as follows: Sales $540,000 Variable expenses $360,000 Contribution margin $180,000 Fixed expenses $120,000 Net operating income $60,000 The company produce

Lease versus buy decision

In the lease versus buy decision, leasing is often preferable A. Since it does not limit the firm's ability to borrow to make other investments. B. Because, generally, no down payment is required, and there are no indirect interest costs. C. Because lease obligations do not affect the riskiness of the firm. D. All of t

Lease vs. Buy with a Bank Loan

Stanley Corporation is considering a five year, 6,000,000 bank loan to finance service equipment. The loan has an interest rate of 10 percent and is amortized over five years with end-of-year payments. Stanley can also lease the equipment for an end-of-year payment of 1,790,000. What is the difference in the actual out-of-poc

Accounting for Leases

On January 2, 2004, Gonzalez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $90,000 starting at the end of the first year, with title passing to Gonzalez at the expiration of the lease. Gonzalez treated this transaction as a capital lease. The drill press has an

Figuring NAL of a lease

Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. 2. Under either the lease of the purchase, Big Sky must pa

Business Law UCC2-712,2A-518

I need help in finding a solution to Business Law UCC2-712,2A-518 which is a remedy of the buyer or lessee which is under the RIGHT OF COVER. I need a short a paragraph for each explanation of the right of cover. Thanks Explanation # 1 (demonstrate how an existing statute or regulation provides a remedy to a consumer when

Lease vs purchase

Danny is considering buying a new computer. The computer is $2,090.00. Should Danny purchase it outright, or lease it? A purchase would be done via credit card, financed at 15%, with payments of 100 dollars per month applied. Here are the terms for his three lease options: FML Lease Months Payment/mo Total$ ........

Information System

Description of an information system that you have encountered, such as an automated teller machine (ATM). Use the concepts of input, processing, output, and feedback to describe the system's function and value.

Who Should Buy the New Warehouse Building

Caroline is the sole shareholder of Lincoln Corporation. Lincoln's sales have doubled in the last four years, and Caroline has determined that the business needs a new warehouse. Caroline has asked your advice as to whether she should: (1) Have the corporation acquire the warehouse or (2) Acquire the warehouse herself and

Statement Cash Flow - Direct Method

The following information and financial statements excerpts pertain to Le Chateau Meaux Inc. a. All short term investments (securities available for sale as per SFAS 115, 1993)) were purchased on 12/31/04 and sold during 2005. b. The company entered a lease agreement on 12/31/05. c. Fixed assets with a net book value of $15 w

Operating, investing, and financing activities

a) Why is it important to classify cash flows according to operating, investing, and financing activities? What does each category represent? b) Also, What are the three types of capital available to a firm (assume leasing is a form of debt)? How do firms obtain these three types of capital?

Analysis of a Business Problem

I figured out B, but cannot get A and C. Any help would be appreciated. Jean-Luc is a financial executive with Starship Enterprises. Although Jean-Luc has not had any formal training in finance or accounting, he has a "good sense" for numbers and has helped the company grow from a very small company ($500,000 sales) to a l

Accounting Multiple Choice

48. Which of the following is not a source of industry information? A) SEC manuals B) Standard and Poor's C) Trade Journals D) Robert Morris Associates 49. Which of the following information would not be filed with the SEC by a publicly traded company? A) 10-K report B) Prospectus C) Proxy statement D) Tax return

Accounting Problem - SCF (Statement of Cash Flow)

P23-1 (SCF-Indirect Method) The following is Blue Man Corp's comparative balance sheet accounts at December 31, 2008 and 2007, with a column showing the increase (decrease) from 2007 to 2008. Comparative Balance Sheets

Buying vs. Renting or Leasing

1. When does it make sense to rent your home vs buying a home? Can you describe it in terms of NPV? 2. If in some situations it makes financial sense for a consumer to lease a car, why does it make sense for a dealer to lease the car to the consumer? 3. Much like many businesses, consumers are faced with buying or leasing

Lease vs Buy

In 05 X company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were constructed on land owned by the company. On Jan 1, 06 X company took possession of the leased property. The 20-yr lease is effective for the period jan 1/06 through dec 31

Lessee Entries with Residual Value

The following facts pertain to a non-cancelable lease agreement between Voris Leasing Company and Zarle Company, a lessee. Inception date January 1, 2007 Annual lease payment due at the beginning of Each year, beginning with January 1, 2007

Lease Accounting Restatements & Lessee Financial Statements/Footnotes:

B) Lessee Financial Statements/Footnotes: Examine the most recent financial statements (10K) of a company with significant leasing operations as a lessee. Briefly summarize anything you thought was interesting in your review. As one option, many retailers undergo significant leasing operations as lessees as do airline compani

Lease vs. Buy Calculations

1) You want a new car. Price of car $40,000, you can purchase for $37 K. You can lease it for $5000 down, and payments of $650 per month for 60 months with the option to buy for $1000 at the end of the lease. Would you do so at 7.2%? Ignore all tax affects. (So do you lease or buy, and the calculations)

Multiple Choice Questions: Lease vs Buy, Present Value, Rate of Return, Annuity

1) A company has an option to purchase equipment or $24,000 but can lease the identical equipment for $5,000 per month for the next 6 years. Its WACC is 7.656% and the equipment has a salvage value if $1000 an the end of 6 years. Which option should the company take? ? Lease ? Buy ? Indifference ? Not enough information to


I am doing a paper on the financial aspect of leasing vs buying on a budget, can you give me some ideas to start my paper?

Lease vs. Buy Option

Company has the option to purchase equipment for $24,000, but can lease the same equipment for $5,000 per month for the next 6 years. Its WACC is 7.656% and has an equipment salvage of $1,000 at the end of 6 years. Which option should the company take? a. Lease b. Buy c. Indifference d. Not enough information to answer; ca

Net advantage to leasing

Redstone Corporation is considering a leasing arrangement to finance some special manufacturing tools that it needs for production during the next three years. A planned change in the firm's production technology will make the tools obsolete after 3 years. The firm will depreciate the cost of the tools on a straight-line basis

Real estate buy versus lease

Below is a real estate exercise that calls for a comparison between buying and leasing a property. I am not a real estate major and I do not understand what I am supposed to do with that $100,000 stated in the beginning. I am looking for help in devising a way that the cash flows can be compared. I have never worked with a lease

Capitalizing Leases and Related Assets

One alleged advantage of leasing voiced in the past is that it kept liabilities off the balance sheets, thus making it possible for a firm to obtain more leverage than it otherwise could have. This raised question of whether or not both the lease obligation and the asset involved should be capitalized and shown on the balance s

Operating and Financial Leases

1. Distinguish between operating leases and financial leases. Would you be more likely to find an operating lease employed for a fleet of trucks or for a manufacturing plant? Would you be more likely to find that lessees are high or low income tax brackets as compared with lessors?