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Problem 18-4 clarification "Dear tutor thank you f...

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Problem 18-4 clarification "Dear tutor thank you for your efforts but below are the questions that I needed answered thank you for your help."From tutor"An expert in Finance has answered your question: Dear Student, Please post your new question in new thread. Regards Rachel P. Answered your question on 4/14/2012 at 6:10pm (1 hour 12 minutes 29 seconds later) I'm Online | Verified Expert Tutor | 99.1% positive feedback | 333 answers Problem 18-4 Lease versus Buy eBook 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: The machinery falls into the MACRS 3-year class. Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance. The firm's tax rate is 40%. The loan would have an interest rate of 13%. The lease terms call for $400,000 payments at the end of each of the next 4 years. Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year. 1) What is the present value cost of ownership? Round your answer to the nearest cent. $_______ 2) What is the present value cost of leasing? Round your answer to the nearest cent. $_______ "

 

Paper#8697 | Written in 18-Jul-2015

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