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Big Al's Pizza Managerial Accounting Part Seven:...




Big Al's Pizza Managerial Accounting Part Seven: Using net present value (NPV) analysis compare the present value of the lease payments with the cost of buying the equipment to replace the leased equipment as explained in Part Seven. Assume a 10% discount rate. Which option would you prefer and why? If Big Al has the option of purchasing equipment from another supplier for $190,000, which promises to reduce operating costs by 1,000 per month for the 5 years life of the equipment, (assume a 10% discount rate) which option would you prefer? Why?,Thank you!,Part Seven Big Al?s currently leases its equipment from Pizza Products for $2,500 per month. Two years of the five-year lease term remain. Big Al?s can terminate the lease at any time by paying a penalty of $10,000. Big Al?s is considering purchasing equipment to replace the leased equipment. Big Al?s must purchase 10 units of each piece of equipment. Big Al?s can purchase equipment at the following prices: Equipment Price (per unit) Dough ball press $5,450 Assembly table 2,100 Cardboard cutter 4,100 Plastic sealer 2,695 Label installer 1,000,The assigment is due today. You think you'll have it ready?,Thank you!


Paper#7791 | Written in 18-Jul-2015

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