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Hello! Can you please answer this question for me?...




Hello! Can you please answer this question for me? 1). Lease Financing vs. Purchasing As part of its overall plant modernization and cost reduction program, the management of Teweles Textile Mills has decided to install a new automated weaving loom. In the capital budgeting analysis of this equipment, the IRR of the project was found to be 20 percent versus a project required return of 12 percent. The loom has an invoice price of $250,000, including delivery and installation charges. The funds needed could be borrowed from the bank through a four-year amortized loan at 10 percent interest rate, with payments to be made at the end of each year. In the event that the loom is purchased, the manufacturer will contract and service it for a fee of $20,000 per year at the end of each year. The loom will be depreciated over four years using the straight line method, with a salvage value of $42,500. And Teweles's tax rate is 40 percent. Apilado Automation Inc., maker of the loom, has offered to lease the loom to Teweles for $70,000 upon delivery and installation (at t=0), plus four additional lease payments of $70,000 to be made at the ends of Years 1 through 4. The lease agreement includes maintenance and servicing. Teweles plans to build an entirely new plant in four years, so it has no interest in either leasing or owning the proposed loom for more than that period. (a). Should the loom be leased or purchased? Explain and show your work.,Ok thank you!!,Hi Rachel! Can you please explain to me for the first tab (Project Adoption) what does #REF! Mean? Aren't there suppose to be figures in these cells?,Nevermind Rachel, I reopened it and the figures appeared. However, I'm a little lost with the first tab (Project Adoption). I see where the second tab (Leasing Build a Model) comes in, it's the answer and explanation to the question (a) I asked but I don't fully understand where the tab (Project Adoption) comes into play. Can you please explain this to me and how it is relevant to the question?,Ok, so to be clear I would abort the "project adoption" tab?


Paper#10135 | Written in 18-Jul-2015

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