please help with all
Ch 19: Assignment - Lease Financing 4. The lessee's lease analysis Consider the case of Shoe Building Inc. (SBI): Shoe Building Inc (SBI) is considering the purchase of new manufacturing equipment that will cost $15.000 (including shipping and installation). Se can take out a 4-year. $15,000 loan to pay for the equipment at an interest rate of 3.60%. The loan and purchase agreements will also contain the following provisions The annual maintenance expense for the equipment is expected to be $150. The equipment has a four-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a three-Year asset are 33,339, 44.45%, 14.81% and 7:419, respectively, The corporate tax rate for SBI s 459. Note: Shoe Building Inc. (SBI) allowed to take a full-year depreciation tax saving deduction in the first yea three-year asset are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. The corporate tax rate for SBI is 45%. Note: Shoe Building Inc. (SBT) is allowed to take a full-year depreciation tax-saving deduction in the first year. Based on the preceding information, complete the following tables. (Note Round the annual loan payment value to swo decimal places and all other values to the nearest dollar.) Annual loan payment will be: Annual tax savings from maintenance will be Value 34.94 568 Year 2 Year 3 Year 4 Year 1 1920 Taavings from depreciation Net cash flow BORIN E90 Thule the nearest of own the set will be 59,524 SIS LS SE4 Paner parte IRINA Not ch: Assignment -Lease Financing Tax savings from depreciation Net cash flow Year 1 $2,250 $1,682 v Year 2 $3,000 $990 Year 3 $1.000 -$3,049 V Year 4 $500 w 3.650 w Thus, the net present value (NPV) cost of owning the asset will be: $9.524 0 $8,815 O-$8.315 O $10.666 Shoe Building Inc. (SBT) has been offered an operating lease on the same equipment. The four-year lease requires end-of-year payments of $600 and the firm will have the option to buy the asset in four years for $3,300. The firm will want to use the equipment longer than four years, so it plans to exercise this option. All maintenance will be provided by the lessor. What is the NPV Cost of leasing the asset? (Note: Round your answer to the nearest dollar 0-$4.308 +5952 -$14,040 55,385 Should not buy the woulmat FO LO Ch 19: Assignment - Lease Financing 4. The lessee's lease analysis Consider the case of Shoe Building Inc. (SBI): Shoe Building Inc (SBI) is considering the purchase of new manufacturing equipment that will cost $15.000 (including shipping and installation). Se can take out a 4-year. $15,000 loan to pay for the equipment at an interest rate of 3.60%. The loan and purchase agreements will also contain the following provisions The annual maintenance expense for the equipment is expected to be $150. The equipment has a four-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a three-Year asset are 33,339, 44.45%, 14.81% and 7:419, respectively, The corporate tax rate for SBI s 459. Note: Shoe Building Inc. (SBI) allowed to take a full-year depreciation tax saving deduction in the first yea three-year asset are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. The corporate tax rate for SBI is 45%. Note: Shoe Building Inc. (SBT) is allowed to take a full-year depreciation tax-saving deduction in the first year. Based on the preceding information, complete the following tables. (Note Round the annual loan payment value to swo decimal places and all other values to the nearest dollar.) Annual loan payment will be: Annual tax savings from maintenance will be Value 34.94 568 Year 2 Year 3 Year 4 Year 1 1920 Taavings from depreciation Net cash flow BORIN E90 Thule the nearest of own the set will be 59,524 SIS LS SE4 Paner parte IRINA Not ch: Assignment -Lease Financing Tax savings from depreciation Net cash flow Year 1 $2,250 $1,682 v Year 2 $3,000 $990 Year 3 $1.000 -$3,049 V Year 4 $500 w 3.650 w Thus, the net present value (NPV) cost of owning the asset will be: $9.524 0 $8,815 O-$8.315 O $10.666 Shoe Building Inc. (SBT) has been offered an operating lease on the same equipment. The four-year lease requires end-of-year payments of $600 and the firm will have the option to buy the asset in four years for $3,300. The firm will want to use the equipment longer than four years, so it plans to exercise this option. All maintenance will be provided by the lessor. What is the NPV Cost of leasing the asset? (Note: Round your answer to the nearest dollar 0-$4.308 +5952 -$14,040 55,385 Should not buy the woulmat FO LO
