Details of this Paper

Problem 20-4 (Lease versus Buy) Big Sky Mining...




Problem 20-4 (Lease versus Buy) Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. 2. Under either the lease or purchase, Big Sky must pay for insurance, property taxes, and maintenance. 3. The firm's tax rate is 40%. 4. The loan would have an interest rate of 15%. 5. The lease terms call for $400,000 payments at the end of each of the 4 years. 6. Assume that Big Sky Mining has no use for the machine beyond the expiration of the lease. The lease has an estimated residual value of $250,000 at the end of the 4th year. What is the NAL of the lease?,Thank you!! The answer in the book is NAL=$108,048 Once again, Thank you


Paper#8696 | Written in 18-Jul-2015

Price : $25