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please solve it quickly Analyse the cost of renting, leasing, and purchasing an item of construction equipment under the conditions described. Evaluate total net after-tax
please solve it quickly
Analyse the cost of renting, leasing, and purchasing an item of construction equipment under the conditions described. Evaluate total net after-tax cash flow and its present value.
Company's marginal tax rate %42 Company's after-tax rate of return %8.5 Planned equipment use 2000/hour/year for 5 years Purchase assumptions Equipment cost $125,000 Estimated resale value after 5 years $52,000 Cost recovery method = 5-years Yearly depreciation by sum of the year digits method Investment credit %10 of equipment cost Cost basis Equipment cost less half of investment credit Down payment %25 of equipment cost Loan Period 36 month Loan interest rate %12 Monthly payment $3,985.72 Loan amortization Interest; Year 1; $47,828.64 $12,498.73 Year 2; $47,828.64 $8,018.03 Year 3; $47,828.64 $2,969.16 Lease assumptions Term of lease 5 years Lease payment $3,750 / month Initial payment 6 months in advance Rental assumptions Rental period 5 years Rental rate $5,750 /month Mid-year present worth factors for i =%7; Initial = 1.00000 Year 1; ? Year 2; ? Year 3; ? Year 4; ? Year 5; ? Final (end of Year 5); ? *Hint: For mid-year present worth factor you should consider the average of start-of-year and end-of-year values. Company's marginal tax rate %42 Company's after-tax rate of return %8.5 Planned equipment use 2000/hour/year for 5 years Purchase assumptions Equipment cost $125,000 Estimated resale value after 5 years $52,000 Cost recovery method = 5-years Yearly depreciation by sum of the year digits method Investment credit %10 of equipment cost Cost basis Equipment cost less half of investment credit Down payment %25 of equipment cost Loan Period 36 month Loan interest rate %12 Monthly payment $3,985.72 Loan amortization Interest; Year 1; $47,828.64 $12,498.73 Year 2; $47,828.64 $8,018.03 Year 3; $47,828.64 $2,969.16 Lease assumptions Term of lease 5 years Lease payment $3,750 / month Initial payment 6 months in advance Rental assumptions Rental period 5 years Rental rate $5,750 /month Mid-year present worth factors for i =%7; Initial = 1.00000 Year 1; ? Year 2; ? Year 3; ? Year 4; ? Year 5; ? Final (end of Year 5); ? *Hint: For mid-year present worth factor you should consider the average of start-of-year and end-of-year valuesStep by Step Solution
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