And Book As part of its overall plant modernization and cost reduction program, the management of Tanner Woods Textile Mills has decided to install new automated waving room In the capital budgeting analysis of this equipment, the IRR of the project was 16 versus a project required return of 125 The loom has an invoice price of $300,000, including delivery and installation charges. The funds needed could be borrowed from the bark through a 4-year amortized foan at a 10% interest rate, with payments to be made at year end. In the event the loom is purchased the manufacturer will contract to maintain and service for a fee of $19,000 per year pad at year end. The loom falls in the MACRS 5-vardess, and Tanner Woods's marginal federal-plus-state tax rate la 35%. The applicable MACS are 2095, 3294, 195, 129, 115 and 6% United Automation Inc. maker of the loom has offered to lease the foom to Tanner-Woods for $80,000 upon delivery and installation (ott - 0) plus 4 additional annual lease payments of $80,000 to be made at the end of Years I through 4. (Note that there are 5 tease payments in total.) The lease agreement includes maintenance servicing Actually, the loom has an expected life of 10 years at which time its expected salvage value is tero: however, after 4 years, its market value is expected to equal les boak value of 551,000. Tanner-Woods plans to build an entirely new plant in 4 years, so it has no interest in leasing or owning the proposed foom for more than that period a. Should the loon be leased or purchased? Do not round intermediate calculations. Round your answers to the nearest dollar. Negative value(s) should be indicated by a minus sign PV cost of owning at 6.50 $ PV cost of leasing at 6.50% iss Tanner-Woods Textile should Select the loom, b. The salvage value is clearly the most uncertain cash flow in the analysis. Assume that the propriate salvage value pretax discount rate is 16. What would be the effect of a salvage value risk adjustment on the decision? Do not round intermediate calculations. Round your answer to the nearest dollar, Negative valon should be indicated by a minus sign PV cost of owning is s The firm should select the loom c. The original-analysis assumed that Tanner-Woods would not need the loom after yearsNow assume that the firm will continue to use the loom after the expres Thus, if it leased, Tanner Woods would have to buy the asset after 4 years at the then existing market value, which is assumed to equat the book value. What affect would this requirement have on the basic analysis? (No numerical analysis is required: just verbalize) The firm would choose to select- Checksy Work remaining) eBook As part of its overall plant modernization and cost reduction program, the management of Tanner Woods Textile Mills has decided to install a new automated weaving loom In the capital budgeting analysis of this equipment, the IRR of the project was 16% versus a project required return of 12%. The loom has an invoice price of $300,000, including delivery and installation charges. The funds needed could be borrowed from the bank through a 4 year amortized loan at a 10% interest rate, with payments to be made at year-end. In the event the loom is purchased, the manufacturer will contract to maintain and service it for a fee of $19,000 per year paid at year-end. The loom falls in the MACRS 5-year class, and Tanner-Woods's marginal federal-plus-state tax rate is 35%. The applicable MACRS rates are 20%, 32%, 1994, 12%, 11%, and 6%. United Automation Inc., maker of the loom, has offered to lease the loom to Tanner-Woods for $80,000 upon delivery and installation (att-0) plus additional annual lease payments at $80,000 to be made at the end of Years 1 through 4 (Note that there are 5 lease payments in total.) The lease agreement includes maintenance servicios Actually, the loom has an expected life of 10 years, at which time its expected salvage value is zero; however, after 4 years, its market value is expected to equalis book value of $51,000. Tanner-Woods plans to build an entirely new plant in 4 years, so it has no interest in leasing or owning the proposed loom for more than that period 2. Should the loom be leased or purchased? Do not round intermediate calculations. Round your answers to the nearest dollar. Negative value(s) should be indicated by a minus sign PV cout of owning at 6.50% is $ PV cost of leasing at 6.50% is $ Tanner Woods Textile should select the loom. b. The salvage value is clearly the most uncertain cash flow in the analysis. Assume that the appropriate salvage value pretax discount rate is 16%. What would be the effect of a salvage value risk adjustment on the desion? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value should be indicated by a minus sign PV cost of owning is The tim should be the loom, The original analysis assumed that Tanner Woods would not need the loom after 4 years Now assume that the firm will continue to use the loom after the seases Thus, if illnased, fanner-Woods would have to buy the asset after 4 years at the then existing market value, which is assumed to equal the book valueWhat effect would the requirement have on the basic analysis (Nanunerical analysis is required just verbalize.) The firm would choose to Select And Book As part of its overall plant modernization and cost reduction program, the management of Tanner Woods Textile Mills has decided to install new automated waving room In the capital budgeting analysis of this equipment, the IRR of the project was 16 versus a project required return of 125 The loom has an invoice price of $300,000, including delivery and installation charges. The funds needed could be borrowed from the bark through a 4-year amortized foan at a 10% interest rate, with payments to be made at year end. In the event the loom is purchased the manufacturer will contract to maintain and service for a fee of $19,000 per year pad at year end. The loom falls in the MACRS 5-vardess, and Tanner Woods's marginal federal-plus-state tax rate la 35%. The applicable MACS are 2095, 3294, 195, 129, 115 and 6% United Automation Inc. maker of the loom has offered to lease the foom to Tanner-Woods for $80,000 upon delivery and installation (ott - 0) plus 4 additional annual lease payments of $80,000 to be made at the end of Years I through 4. (Note that there are 5 tease payments in total.) The lease agreement includes maintenance servicing Actually, the loom has an expected life of 10 years at which time its expected salvage value is tero: however, after 4 years, its market value is expected to equal les boak value of 551,000. Tanner-Woods plans to build an entirely new plant in 4 years, so it has no interest in leasing or owning the proposed foom for more than that period a. Should the loon be leased or purchased? Do not round intermediate calculations. Round your answers to the nearest dollar. Negative value(s) should be indicated by a minus sign PV cost of owning at 6.50 $ PV cost of leasing at 6.50% iss Tanner-Woods Textile should Select the loom, b. The salvage value is clearly the most uncertain cash flow in the analysis. Assume that the propriate salvage value pretax discount rate is 16. What would be the effect of a salvage value risk adjustment on the decision? Do not round intermediate calculations. Round your answer to the nearest dollar, Negative valon should be indicated by a minus sign PV cost of owning is s The firm should select the loom c. The original-analysis assumed that Tanner-Woods would not need the loom after yearsNow assume that the firm will continue to use the loom after the expres Thus, if it leased, Tanner Woods would have to buy the asset after 4 years at the then existing market value, which is assumed to equat the book value. What affect would this requirement have on the basic analysis? (No numerical analysis is required: just verbalize) The firm would choose to select- Checksy Work remaining) eBook As part of its overall plant modernization and cost reduction program, the management of Tanner Woods Textile Mills has decided to install a new automated weaving loom In the capital budgeting analysis of this equipment, the IRR of the project was 16% versus a project required return of 12%. The loom has an invoice price of $300,000, including delivery and installation charges. The funds needed could be borrowed from the bank through a 4 year amortized loan at a 10% interest rate, with payments to be made at year-end. In the event the loom is purchased, the manufacturer will contract to maintain and service it for a fee of $19,000 per year paid at year-end. The loom falls in the MACRS 5-year class, and Tanner-Woods's marginal federal-plus-state tax rate is 35%. The applicable MACRS rates are 20%, 32%, 1994, 12%, 11%, and 6%. United Automation Inc., maker of the loom, has offered to lease the loom to Tanner-Woods for $80,000 upon delivery and installation (att-0) plus additional annual lease payments at $80,000 to be made at the end of Years 1 through 4 (Note that there are 5 lease payments in total.) The lease agreement includes maintenance servicios Actually, the loom has an expected life of 10 years, at which time its expected salvage value is zero; however, after 4 years, its market value is expected to equalis book value of $51,000. Tanner-Woods plans to build an entirely new plant in 4 years, so it has no interest in leasing or owning the proposed loom for more than that period 2. Should the loom be leased or purchased? Do not round intermediate calculations. Round your answers to the nearest dollar. Negative value(s) should be indicated by a minus sign PV cout of owning at 6.50% is $ PV cost of leasing at 6.50% is $ Tanner Woods Textile should select the loom. b. The salvage value is clearly the most uncertain cash flow in the analysis. Assume that the appropriate salvage value pretax discount rate is 16%. What would be the effect of a salvage value risk adjustment on the desion? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value should be indicated by a minus sign PV cost of owning is The tim should be the loom, The original analysis assumed that Tanner Woods would not need the loom after 4 years Now assume that the firm will continue to use the loom after the seases Thus, if illnased, fanner-Woods would have to buy the asset after 4 years at the then existing market value, which is assumed to equal the book valueWhat effect would the requirement have on the basic analysis (Nanunerical analysis is required just verbalize.) The firm would choose to Select