Question
Suppose that National Waferonics has before it a proposal for a four-year financial lease. Suppose that National Waferonics has before it a proposal for a
Suppose that National Waferonics has before it a proposal for a four-year financial lease.
| Suppose that National Waferonics has before it a proposal for a four-year financial lease.
These flows reflect the cost of the machine, depreciation tax shields, and the after-tax lease payments. Ignore salvage value. Assume the firm could borrow at 14% and faces a 21% marginal tax rate.
a. What is the value of the equivalent loan? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the value of the lease? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. Suppose the machines NPV under normal financing is $3,900. Should National Waferonics invest? | ||||||||||||||||||||
These flows reflect the cost of the machine, depreciation tax shields, and the after-tax lease payments. Ignore salvage value. Assume the firm could borrow at 14% and faces a 21% marginal tax rate.
a. What is the value of the equivalent loan? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the value of the lease? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. Suppose the machines NPV under normal financing is $3,900. Should National Waferonics invest?
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Information Systems Assurance
Authors: David C Chan
2nd Edition
150081458X, 9781500814588
