Question

Airgas Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease...

Airgas Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $40,000 per year with the first payment occurring immediately. The equipment would cost $185,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 25%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 2? (Hint: For this and following questions, review problem 6 in the practice problems of Chapter 21)

$31,450

-$44,150

-$42,750

$29,500

-$39,250

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Airgas Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease...
Airgas Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $40,000 per year with the first payment occurring immediately. The equipment would cost $185,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 25%. What is the NPV of...
Greencore Corporation is considering leasing a new equipment. The lease lasts for 8 years. The lease...
Greencore Corporation is considering leasing a new equipment. The lease lasts for 8 years. The lease calls for 8 payments of $225,000 per year with the first payment occurring immediately. The equipment would cost $1,480,000 to buy and would be straight-line depreciated to a zero salvage value over 8 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 25%. What is the after-tax cash...
Hatwick Technology is considering leasing a new equipment. The lease lasts for 5 years. The lease...
Hatwick Technology is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $10,200 per year with the first payment occurring immediately. The equipment would cost $44,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 34%. What is the after-tax cash...
Spectrum Corporation is considering leasing a new equipment. The lease lasts for 8 years. The lease...
Spectrum Corporation is considering leasing a new equipment. The lease lasts for 8 years. The lease calls for 8 payments of $142,000 per year with the first payment occurring immediately. The equipment would cost $1,020,000 to buy and would be straight-line depreciated to a zero salvage value over 8 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 25%. What is the after-tax cash...
Hatwick Technology is considering leasing a new equipment. The lease lasts for 5 years. The lease...
Hatwick Technology is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $10,200 per year with the first payment occurring immediately. The equipment would cost $44,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 34%. What is the NPV of...
Your firm is considering leasing a new computer. The lease lasts for 8 years. The lease...
Your firm is considering leasing a new computer. The lease lasts for 8 years. The lease calls for 8 payments of $8,000 per year with the first payment occurring immediately. The computer would cost $50,000 to buy and would be straight-line depreciated to a zero salvage value over 8 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 5%. The corporate tax rate is 34%. What is the after-tax cash...
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease...
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 9 payments of $1,000 per year. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage value over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the NPV of the lease relative to the purchase...
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5...
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 5 payments of $300,000 per year. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. What is the after-tax cash flow from leasing (relative to purchasing) in year 0? What is the...
Your firm is considering leasing a new computer. The lease lasts for 4 years. The lease...
Your firm is considering leasing a new computer. The lease lasts for 4 years. The lease calls for 5 payments of $450 per year with the first payment occurring immediately. The computer would cost $5,900 to buy and would be depreciated using the straight-line method to zero salvage over 4 years. The firm can borrow at a rate of 5%. The corporate tax rate is 20%. What is the NPV of the lease?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5...
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 5 payments of $300,000 per year. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. What is the after-tax cash flow from leasing (relative to purchasing) in year 0? Group of answer...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT