XYZ structured as a partnership with all partners on the maximum individual marginal tax rate of 50%, needs a new casting line which will cost $350,000. XYZ can borrow the funds at 8% p.a. after tax compounded semi-annually over 3 years. Alternatively, it can arrange lease finance comprising six pay ments of $70,000, one every 6 months starting immediately. There is no residual value built into the contract. The leasing company, however, has agreed to transfer the ownership of the line to XYZ for the payment of $1. Casting lines are normally depreciated at the rate of 25%% p.a.;Which method of financing would you recommend? Assume for simplicity's sake that the tax benefits from each lease payment and the tax benefits forgone for depreciation are received without time lag in each half-year period.;Additional Requirements;Level of Detail: Show all work;Other Requirements: plz show the answer step by step with formula and dont use excel to answer the question.
Paper#30710 | Written in 18-Jul-2015Price : $37