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Please assist in the attached questions - include reasoning behind the answers. Thanks! Kohers Inc. is considering a leasing arrangement to finance some manufacturing tools
Please assist in the attached questions - include reasoning behind the answers. Thanks!
Kohers Inc. is considering a leasing arrangement to finance some manufacturing tools that it needs for the next 3 years. The tools will be obsolete and worthless after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life. It can borrow $4,800,000, the purchase price, at 10% and buy the tools, or it can make 3 equal end-ofyear lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a 3-year simple interest loan, with interest-only paid at the end of the year. The loan principal would be repaid in year 3. The firm's tax rate is 40%. Annual maintenance costs associated with ownership would start immediately and are estimated at $240,000, but this cost would be borne by the lessor if it leases. What is the net advantage to leasing (NAL), in thousands? (Suggestion: Delete 3 zeros from dollars and work in thousands.) Assume that the capital structure is 100% debt when calculating WACC. A. $642,500 B. $-1,602,830 C. $2,353,230 D. $619,410 If one Swiss franc can purchase $0.71 U.S. dollars, how many Swiss francs can one U.S. dollar buy? A. 0.504 B. 0.71 C. 1.98 D. 1.41Step by Step Solution
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