Shoe Building Inc. (SBI) is considering the purchase of new manufacturing equipment that will cost $10,000 (including shipping and Installation). SBI can take out a four-year, $10,000 loan to pay for the equipment at an interest rate of 2.40%. The loan and purchase agreements will also contain the following provisions The annual maintenance expense for the equipment is expected to be $100 The equipment has a four year depreciable life. The Modified Accelerated Cost Recovery Systems (MACRS) depreciation rates for a three-year asset are 33.33%, 44.45%, 14.81%, and 7.41%, respectively, The corporate tax rate for SBI is 40%. (Note: Do not round Intermediate calculations.) Note: Shoe Building Inc. (Ser) is allowed to take a fullyear depreciation tax saving deduction in the first year Based on the preceding information, complete the following tables Value Annual loan payment will be Annual tax savings from maintenance will be Year 1 Year 2 Year 3 Year 4 Tax savings from depreciation Net cash flow Thus, the net present value (NPV) cost of owning the asset will be: Tools $6,344 -$5.844 $14,086 $7,676 35 Shon tiuilding inc. (SBI) has been offered an operating lesse on the same equipment. The four-year lease requires end-of-year payments of 100, and the firm will have the option to buy the asset in four years for $2,200. The firm will want to use the equipment fonger than four years, so it plans to exercise this option. All maintenance will be provided by the lessor. What is the NPV cost of losing the await? $700 53,755 -$3,004 Should Sot lease or buy the equipment? Buy Lease Shoe Building Inc. (SBI) is considering the purchase of new manufacturing equipment that will cost $10,000 (including shipping and Installation), set can take out a four-year, $10,000 loan to pay for the equipment at an interest rate of 2.40%. The loan and purchase agreements will also contain the following provisions: The annual maintenance expense for the equipment is expected to be $100. The equipment has a four-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a three-year asset are 33.33%, 44.45%, 14.81%, and 7,41%, respectively, The corporate tax rate for SBI is 40%. (Note: Do not round Intermediate calculations.) Note: Shoe Building Inc. (SBI) is allowed to take a full-year depreciation tax saving deduction in the first year. Based on the preceding information, complete the following tables: Value Annual loan payment will be Annual tax savings from maintenance will be: Year 1 Year 2 Year 3 Year 4 Tax savings from depreciation Net cash flow Thus, the net present value (NPV) cost of owning the asset will be: -$6,344 -$5,844 -$14,086 $7,676 Shoe Building Inc. (SBI) has been offered an operating lease on the same equipment. The four year lease requires end-of-year payments of $400, and the firm will have the option to buy the asset in four years for $2,200. 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? -$700 -$3,755 -$3,004 -$9,300 Should SBI lease or buy the equipment? Buy Lease