assist management in marking the proper lease-versus-buy decision, you are ked to answer the following questions. a. Assuming that the lease can be arranged, should Sullivan-Swift lease or borrow and buy the equipment? Do not round intermediate calculations. Round your answer to the nearest dollar. Use a minus sign to enter a negative value, if there is a disadvantage. Net advantage to leasing (NAL): $ Sullivan-Swift should the equipment. b. Consider the $300,000 estimated salvage value. Is it appropriate to discount it at the same rate as the other cash flows? What about the other cash flows - are they all equally risky? We discounted it at the same rate, but it risky, so we should use a discount rate, By doing so, you the value of the inflow in the last year in the cost of owning analysis. 1. Lease versus Buy Eicel Online Structured Activity: Lnase versus buy Sulwan-Swit Mining Company must imball $2.6 miltion of new machinery in its Nevada mine. It can obtain a bank loan for 1004 of the requirnd amount, Ahernatively, a Nevata investment banking firm that represents a group of investon believes that it can amange for a lease financing plan. Assume that the following facts apply: 1. The equiprent falls in the MACRS 3 - wear elass. The applicable MACRS ratis am 32%,45%6,15%, and 7%. 2. Estimated maintenance expentes are $65,000 per yean? 2. Sullivan-shitt's federal-pists state tax rate is 45%. 4. If the money is borrowed, the bank loan will be at a rate of 19%, amortized in 4 equal imatallments to be paid at the end of each year. 5. The tentative lease terma call for end of vear paymenta of $300.000 per year for 4 yeas. 6. Under the proposed lene term, the lessee must pay for insurance, praperty taxes, and maintenance. whether the firm leases or purchases it. The best estimate for the salvage value is 4300,000 , but it may be much higher or forrer under certain circumstances, The data has been collected in the Mrreveft Ecel Online file below. Open the spreadeheet and perfoem the required analvsis to antiwer the questions below. Opent apreaduheet To awist manogenwent in marking the proper leaserversus buy decitions you are asked to answar the following questions. Uhe a monut sion to enter a negative value, if there is in disadvantage: Tiet advantage to leating (RCAL) is Fullivan-5whe should the equpment. assist management in marking the proper lease-versus-buy decision, you are ked to answer the following questions. a. Assuming that the lease can be arranged, should Sullivan-Swift lease or borrow and buy the equipment? Do not round intermediate calculations. Round your answer to the nearest dollar. Use a minus sign to enter a negative value, if there is a disadvantage. Net advantage to leasing (NAL): $ Sullivan-Swift should the equipment. b. Consider the $300,000 estimated salvage value. Is it appropriate to discount it at the same rate as the other cash flows? What about the other cash flows - are they all equally risky? We discounted it at the same rate, but it risky, so we should use a discount rate, By doing so, you the value of the inflow in the last year in the cost of owning analysis. 1. Lease versus Buy Eicel Online Structured Activity: Lnase versus buy Sulwan-Swit Mining Company must imball $2.6 miltion of new machinery in its Nevada mine. It can obtain a bank loan for 1004 of the requirnd amount, Ahernatively, a Nevata investment banking firm that represents a group of investon believes that it can amange for a lease financing plan. Assume that the following facts apply: 1. The equiprent falls in the MACRS 3 - wear elass. The applicable MACRS ratis am 32%,45%6,15%, and 7%. 2. Estimated maintenance expentes are $65,000 per yean? 2. Sullivan-shitt's federal-pists state tax rate is 45%. 4. If the money is borrowed, the bank loan will be at a rate of 19%, amortized in 4 equal imatallments to be paid at the end of each year. 5. The tentative lease terma call for end of vear paymenta of $300.000 per year for 4 yeas. 6. Under the proposed lene term, the lessee must pay for insurance, praperty taxes, and maintenance. whether the firm leases or purchases it. The best estimate for the salvage value is 4300,000 , but it may be much higher or forrer under certain circumstances, The data has been collected in the Mrreveft Ecel Online file below. Open the spreadeheet and perfoem the required analvsis to antiwer the questions below. Opent apreaduheet To awist manogenwent in marking the proper leaserversus buy decitions you are asked to answar the following questions. Uhe a monut sion to enter a negative value, if there is in disadvantage: Tiet advantage to leating (RCAL) is Fullivan-5whe should the equpment
