Question

Question 57 Your company is considering the purchase of a fleet of cars for $200,000. It...

Question 57

Your company is considering the purchase of a fleet of cars for $200,000. It can borrow at 6%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 34% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing?

Select one:

a. $5,399

b. $1,802

c. $3,434

d. $3,961

e. $1,134

Homework Answers

Answer #1
Loan Principle Amount    200,000.00
Annual Interest Rate 6.00%
Loan Period (in year)                4.00
Repayment      57,718.00
Lease Benefit
Y1 Y2 Y3 Y4
Cash inflow 55000 55000 55000 55000
Loan repayment -57718 -57718 -57718 -57718
drepreciation (CCA @30%) -60000 -42000 -29400 -20580
Net cash flow -62718 -44718 -32118 -23298
Tax @34% 0 0 0 0

Lease benefit = 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.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Your company is considering the purchase of a fleet of cars for $200,000. It can borrow...
Your company is considering the purchase of a fleet of cars for $200,000. It can borrow at 11%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 40% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing? Select one: a....
Question 31 Your company is considering the purchase of a fleet of cars for $200,000. It...
Question 31 Your company is considering the purchase of a fleet of cars for $200,000. It can borrow at 10%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 40% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing? Select...
Webster's Tree Farm is considering the purchase of a backhoe costing $47,000. The backhoe can be...
Webster's Tree Farm is considering the purchase of a backhoe costing $47,000. The backhoe can be leased for 5 years at $13,900 per year or it can be purchased at an interest rate of 7 percent. The estimated life of the backhoe is 5 years after which time it will be worthless. The corporate tax rate is generally 35 percent. However, the company does not expect to owe any taxes for the next 6 years due to accumulated net operating...
Your firm needs to either buy or lease $240,000 worth of vehicles. These vehicles have a...
Your firm needs to either buy or lease $240,000 worth of vehicles. These vehicles have a life of 4 years after which time they are worthless. The vehicles belong in CCA class 10 (a 30% class) and can be leased at a cost of $70,000 a year for the 4 years.The lease payments are to be made at the beginning of the year. The corporate tax rate is 30% and the cost of debt is 8%. Assume the half-year rule...
Madrano's Wholesale Fruit Company located in? McAllen, Texas is considering the purchase of a new fleet...
Madrano's Wholesale Fruit Company located in? McAllen, Texas is considering the purchase of a new fleet of tractors to be used in the delivery of fruits and vegetables grown in the Rio Grande Valley of Texas. If it goes through with the? purchase, it will spend $400,000 on eight rigs. The new trucks will be kept for 5 years, during which time they will be depreciated toward a $40,000 salvage value using? straight-line depreciation. The rigs are expected to have...
Kohlers Inc. is considering a leasing arrangement to finance some manufacturing tools that it needs for...
Kohlers Inc. is considering a leasing arrangement to finance some manufacturing tools that it needs for the next three years. The tools will be obsolete and worthless after three years. The firm will depreciate the cost of the tools over their three-year MACRS class life (.33, .45, .15, .07). Kohlers can borrow $4,800,000, the purchase price, at 10% and buy the tools, or it can make three equal, end-of-the-year payments of $2,100,000 each and lease them. The loan is a...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how the firms resources incompetencies support the given pressures regarding costs and local responsiveness. Describe entry modes have they usually used, and whether they are appropriate for the given strategy. Any key issues in their global strategy? casestudy: Atlanta, June 17, 2014. Sea of Delta employees and their families swarmed between food trucks, amusement park booths, and entertainment venues that were scattered throughout what would...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT