Its a team work and I have to answer this question 1. Should the asset be purchased using the firm?s optimal financing mix? Resource: Financial Management: Princples and applications ? Chapter 22 Prepare a business memo addressed to me (your CEO)on the decision making factors in the question of whether we (San Diego Orange Company) should lease or buy (using a loan) a new fleet of forklift trucks. There should be a minimum of two parts to your paper encompassing: ? The financial analysis you would perform ? A complete description of the factors involved in the financial analysis plus any intangible advantages or disadvantages that you may identify. HINT ? use the analysis in chapter 22 and break it down into components to discuss how you would analyze the question. I am not expecting you to use specific numbers, but to examine each component of the formula and discuss. For example maintenance costs may be included if you lease but not if you purchase. No APA formatting ? we will discuss the format of a business memo in class. I expect a memo to be short and concise ? try and synthesize your memo to 750 words as practice for your week 5 assignment! THE LEASE-VERSUS-PURCHASE DECISION The lease-versus-purchase decision is a hybrid capital-budgeting problem that forces the analyst to consider the consequences of alternative forms of financing on the investment decision. When we discussed capital budgeting in Chapter 9 and the cost of capital in Chapter 12, we assumed that all new financing would be undertaken in accordance with the firm?s optimal capital structure. When analyzing an asset that is to be leased, the analysis must be altered to consider financing through leasing as opposed to the use of the more traditional debt and equity sources of funds. Thus, the lease-versus-purchase decision requires a standard capital-budgeting type of analysis, as well as an analysis of two alternative financing packages. The lease-purchase decision involves the analysis of two basic issues: 1. Should the asset be purchased using the firm?s optimal financing mix? 2. Should the asset be financed using a financial lease? The answer to the first question can be obtained through an analysis of the project?s NPV, following the method laid out in Chapter 9. There are times when it might be advantageous to lease an asset, even when the NPV for its purchase is negative. The cost savings of a lease may more than offset the negative NPV of purchase. For example, the Alpha Manufacturing Co. is considering the acquisition of a new computer-based inventory and payroll system. The computed net present value of the new system based on normal purchase financing is ?$40, indicating that acquisition of the system through purchasing or ownership is not warranted. However, an analysis of the cost savings resulting from leasing the system (referred to here as the net advantage of leasing, or NAL) indicates that the lease alternative will produce a present value cost savings of $60 over normal purchase financing. Therefore, the net present value of the system if leased is $20 (the net ??????????? CHAPTER 22 TERM LOANS AND LEASES present value if leased equals the NPV of a purchase plus the net advantage of leasing, or ? $40 $60). Thus, the system?s services should be acquired via the lease agreement.,I just need to write about this question 1. Should the asset be purchased using the firm?s optimal financing mix? 350 words,"I just need to write about this question 1. Should the asset be purchased using the firm?s optimal financing mix? 350 words",I need to turn it in tomorrow, do you think it will be ready?,4 hours thanks,sorry to bug but i have a deadline to turn it in,The text references for the paper are in the pdf-only chapter 22 under week 3 on the materials page. The two questions are listed on page 22-9, and the formula break down is throughout the chapter and in table 22-3 on page 22-12. I only need to answer the first bullet, i already gave you chapter 22, what else do you need? I need to turn it in today please let me now if i can count on this website. thanks,?????????,????
Paper#10239 | Written in 18-Jul-2015Price : $25