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{ 1 5 points } Daiwan Semiconductors Company needs to replace an old machine used to lay silicon wafers onto computer processor chips sold to

{15 points} Daiwan Semiconductors Company needs to replace an old machine used to lay silicon wafers onto
computer processor chips sold to their automotive clients. Daiwan has the option to lease or to buy this new
piece of equipment.
Using the case facts outlined below and the method used in class, your task is to determine which alternative
you would choose, whether to lease or buy.
Within your Excel sheet you should create a new tab to perform your analysis. Be sure to perform any analysis
required to support your answer. Be sure to state your conclusion.
A. The Firm:
i. Uses a discount rate of 15% for assessing all new investments
ii. Is subject to an income tax rate of 15.5%
B. The Lease
i. Has a duration of 10 years
ii. Has an annual lease payment of $15,000(before tax)
C. The Financing Option
i. The cost of the asset is $125,000
ii. The useful life of the asset is 10 years, i.e. after 10 years it has no remaining value.
iii. CCA (depreciation for tax purposes) is an equal $12,500 for each of the 10 years of the
asset's useful life.
iv. The asset purchase will be financed in full with debt. The debt will carry a rate of
interest of 6% per annum, will have equal annual payments (at the end of each year) and
will be repaid in full by the end of year 10.
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