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?
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
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
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
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
1. (2-16) The Hermann Company has made $150,000 before taxes each of the last 15 years, and it expects to make $150,000 a year before taxes in the future. However, in 2001 the firm incurred a loss of $650,000. The firm will claim a tax credit at the time it files its 2001 income tax return, and it will receive a check from the U
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?
1. Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's fixed costs, F, are $2 million; 50 earth stations are produced and sold each year; profits total $500,000; and the firm's assets (all equity financed) are $5 million. The firm estimates that it can change its production proces
What are the motivations for leasing? List reasons why a company might prefer to lease rather than buy including business reasons and the effects to the financial statements for alternative options.
What are the four conditions which determine whether a lease is an operating lease or a capital lease. Devise an audit program to test leases.
Crumple Car Rentals is planning to expand into the western part of the United States and needs to acquire approximately 400 additional automobiles for rental purposes. Because Crumple's cash reserves were substantially depleted in replacing the bumpers on existing automobiles with new "fashion plate" bumpers, the expansion fund
Give an example of the effect depreciation has on the decision to lease vs. buy? How is this related to the decision to buy vs. lease? Why?
The store has no accounts receivable (it accepts only cash or bank cards for payments). At year end, an employee earned $200, which the store had not yet paid. Also, at year-end, the store had not yet paid it most recent utilities bills, which totaled $150. Receipts Cash sales
Edison Electronics is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If it purchases the asset, the cost will be $8,000. It can borrow funds for four years at 12 percent interest. The firm will use the three-year MACRS depreciation category (with the associat
1. BE14-1 Ghostbusters Corporation issues $300,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. Don't need to do this one - (BE14-2 The Goofy Company issued $200,000 of 10% bonds on January 1, 2008. The bon
9. Presented below is pension information for Welch Company for the year 2008: Actual return on plan assets $24,000 Interest on vested benefits 15,000 Service cost 30,000 Interest on projected benefit obligation 21,000 Amortization of prior service cost due to increase in benefits 18,000 The amount of pension expense t
Project Scenario Hi, I'm Jan Waters, the controller for Calliope Knowledge Solutions. Welcome to the company. It's good to have you with us. I wanted to talk to you about your new project. As you know, Calliope provides professional education courses. Our top priorities are to offer a low cost product, and exceed market com
Determining the effect of transactions on accounts. See attached file for full problem description.
Project Scenario Hi, I'm Jan Waters, the controller for Calliope Knowledge Solutions. Welcome to the company. It's good to have you with us. I wanted to talk to you about your new project. As you know, Calliope provides professional education courses. Our top priorities are to offer a low cost product, and exceed market com
1. According to GAAP (the generally accepted accounting principles), some leases must be recorded as a purchase. What is the basis for this treatment? a. a lease of this type effectively conveys the same benefits and risks to the lessee as it would an owner of the property b. the lease must be recorded in accordance with the
Edison Electronics is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If it purchases the asset, the cost will be $8,000. It can borrow funds for four years at 12 percent interest. The firm will use the three-year MACRS depreciation category (with the associat
I need to discuss the alternatives and options, my plan chosen and research done (i.e. cost of computers if I chose to buy them for years of training to come because we will always do training). I also need to provide rationale for why I would choose one option over another. Can you help me please? Thank you! Trainin
I need to discuss the alternatives and options, my plan chosen and research done (i.e. cost of computers if I chose to buy them for years of training to come because we will always do training). I also need to provide rationale for why I would choose one option over another. Can you help me please? Thank you! Trainin
The Deluxe Corporation has just signed a 120-month lease on an asset with a 15-year life. The minimum lease payment s are $2,000 per month ($24,000 per year) and are to be discounted back to the present at an 7 percent annual discount rate. The estimated fair value of the property is $175,000. Should the lease be recorded as
0. Managers determine product prices by adding to a cost amount a plus, called a 1. The amount of increase or decrease in revenue expected from a course of action as compared with an alternative is called 2. Costs that have been incurred in the past and are not relevant to a decision are known as 3. Raymond Tile Co. is
Doug Maltbee formed a lawn service business as a summer job. To start the business on May 1, he deposited $1,000 in a new bank account in the name of the proprietorship. The $1,000 consisted of a $600 loan from his father and $400 of his own money. Doug rented lawn equipment, purchased supplies, and hired fellow students to mow
Agronomists at Roma's banana Experimental Research Station, in preparation for the global commercialization of this fruit are seeking to implement the most cost-effective method of harvesting bananas, one that would result in "LONG-RUN" cost minimization. They are contemplating the 2 alternatives described below: PERFORM CA
2) Bob and Jane decide to open their own business selling ergonomically correct office furniture that Jane has designed. Assume they operate this business from leased office space near their home. Also assume that they lease their computer equipment and data base software. The actual production of the furniture is subcontracted
Can you explain to me what off-balance-sheet financing is. What are the benefits of off-balance-sheet financing and what are the drawbacks?