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Hello Kitty Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Sanrio
Hello Kitty Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Sanrio Corporation. The machine can be used for years and then sold for $ at the end of its useful life. Sanrio has presented Hello Kitty with the following options: Buy machine. The machine could be purchased for $ in cash. All maintenance costs, which approximate $ per year, would be paid by Hello Kitty. Lease machine. The machine could be leased for a year period for an annual lease payment of $ with the first payment due immediately. All maintenance costs will be paid for by the Sanrio Corporation and the machine will revert back to Sanrio at the end of the year period. Required: Assuming that a interest rate properly reflects the time value of money in this situation and that all maintenance costs are paid at the end of each year, determine which option Hello Kitty should choose. Ignore income tax considerations. Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. FV of $ PV of $ FVA of $ PVA of $ FVAD of $ and PVAD of $ Find the PV of the Buy option and Lease option.
Hello Kitty Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Sanrio Corporation. The machine can be used for years and then sold for $ at the end of its useful life. Sanrio has presented Hello Kitty with the following options:
Buy machine. The machine could be purchased for $ in cash. All maintenance costs, which approximate $ per year, would be paid by Hello Kitty.
Lease machine. The machine could be leased for a year period for an annual lease payment of $ with the first payment due immediately. All maintenance costs will be paid for by the Sanrio Corporation and the machine will revert back to Sanrio at the end of the year period.
Required:
Assuming that a interest rate properly reflects the time value of money in this situation and that all maintenance costs are paid at the end of each year, determine which option Hello Kitty should choose. Ignore income tax considerations.
Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. FV of $ PV of $ FVA of $ PVA of $ FVAD of $ and PVAD of $
Find the PV of the Buy option and Lease option.
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