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    "question_id": "4253495",
    "url": "\/study-help\/questions\/problem-3-12-marks-mcc-manufacturing-ltd-has-decided-to-4253495",
    "question_creation_date_js": "2024-06-28T06:34:57-04:00",
    "question_creation_date": "Jun 28, 2024 06:34 AM",
    "meta_title": "[Solved] Problem 3 (12 Marks) MCC Manufacturing Lt | SolutionInn",
    "meta_description": "Answer of - Problem 3 (12 Marks) MCC Manufacturing Ltd. has decided to acquire a new piece of machinery in order to improve produc | SolutionInn",
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    "question_title_h1": "Problem 3 (12 Marks) MCC Manufacturing Ltd. has decided to acquire a new piece of machinery in order to improve production.The company does not know",
    "question_title": "Problem 3 (12 Marks) MCC Manufacturing Ltd. has decided to acquire a",
    "question_title_for_js_snippet": "Problem 3 (12 Marks) MCC Manufacturing Ltd  has decided to acquire a new piece of machinery in order to improve production The company does not know whether it should purchase or lease the machinery The initial cost of the machinery is $750,000 Its expected useful life is 7 years, at which point the machine will have a salvage value of $100,000 The machinery falls into asset class 8, which has a CCA rate of 20  and MCC's tax rate is 35  Annual operating costs to run the machine are estimated to be $80,000, including $15,000 per year in maintenance costs (assume end of year cash flows) If MCC leases this asset, the lessor will pay for the maintenance costs MCC's before tax cost of borrowing is 10  and its weighted average cost of capital (WACC) is 15  The proposed annual lease payments in advance are $135,000 for 7 years  Required  Determine if MCC Manufacturing should lease or purchase the machine  (10 marks) Independent of part a , if MCC had to pay a $30,000 security deposit initially and received it back at the end of the lease, would you expect this to increase, decrease or have no impact on the Net Advantage to Leasing (NAL) number You do not need to calculate anything, just explain briefly   (2 marks) Could you help me solve this problem and show all steps ",
    "question_description": "<p><strong>Problem 3 (12 Marks)<\/strong><\/p> <p><\/p> <p>MCC Manufacturing Ltd. has decided to acquire a new piece of machinery in order to improve production.The company does not know whether it should purchase or lease the machinery.The initial cost of the machinery is $750,000.Its expected useful life is 7 years, at which point the machine will have a salvage value of $100,000.The machinery falls into asset class 8, which has a CCA rate of 20% and MCC's tax rate is 35%.Annual operating costs to run the machine are estimated to be $80,000, including $15,000 per year in maintenance costs (assume end of year cash flows).If MCC leases this asset, the lessor will pay for the maintenance costs.MCC's before-tax cost of borrowing is 10% and its weighted average cost of capital (WACC) is 15%.The proposed annual lease payments in advance are $135,000 for 7 years.<\/p> <p><\/p> <p><strong>Required:<\/strong><\/p> <p><\/p> <ol> <li>Determine if MCC Manufacturing should lease or purchase the machine. (10 marks)<\/li> <li>Independent of part a., if MCC had to pay a $30,000 security deposit initially and received it back at the end of the lease, would you expect this to increase, decrease or have no impact on the Net Advantage to Leasing (NAL) number?You do not need to calculate anything, just explain<strong><u>briefly<\/u><\/strong>. (2 marks)<\/li> <\/ol> <p><\/p> <p>Could you help me solve this problem and show all steps?<\/p>",
    "transcribed_text": "",
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        "isbn": "0321836960, 978-0321836960",
        "edition": "12th Edition",
        "authors": "Mario F. Triola",
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