Call/WhatsApp/Text: +44 20 3289 5183

Question: Lester's Gym wants to expand its facilities by obtaining $62,000

09 Sep 2024,9:11 PM

 

Lester's Gym wants to expand its facilities by obtaining $62,000 worth of new exercise equipment. The equipment will have a 4-year life, belongs in a 25% CCA class, and will have no residual value. The cost of borrowed funds is 9.5 percent, the weighted average cost of capital is 12% and the tax rate is 40 percent. Assume the lease payments are payable at the beginning of each year and the lease qualifies as a true tax lease. What is Lester’s breakeven lease payment?

 

DRAFT/STUDY TIPS

Expert answer

This Question Hasn’t Been Answered Yet! Do You Want an Accurate, Detailed, and Original Model Answer for This Question?

 

Ask an expert

Stuck Looking For A Model Original Answer To This Or Any Other
Question?

Related Questions

As a financial analyst for Muffin Construction

As a financial analyst for Muffin Construction, you have been asked to recommend the method of financing the acquisition of new equipment needed by the firm. The equipment has a useful life of eight years. If purchased, the equipment, which costs $700,000, will be depreciated under MACRS rules for 7-year class assets. If purchased, the needed funds can be borrowed at a 10 percent pretax annual rate. Muffin’s weighted after-tax rate of capital is 12 percent. The actual salvage value at the end of eight years is expected to be $50,000. Muffin’s marginal ordinary tax rate is 40 percent. Annual, beginning-of-year ...
Assume in problem 15-1 that Minetellos tax rate is 40%

Assume in problem 15-1 that Minetellos tax rate is 40% and that the equipments CCA would be $20,000 per year. If the company leased the asset on a 2-year lease, the payment would be $22,000 at the beginning of each year. If Minetello borrowed and bought, the bank would charge 10% interest on the loan. In either case, the equipment is worth nothing after 2 years and will be discarded. Should Minetello lease or buy the equipment? DRAFT/STUDY TIPS

The bus costs $1.8 million, with a CCA rate of 25 percent.

Nash Business School is considering whether to lease or buy a shuttle bus for students travelling between its two campuses. The bus costs $1.8 million, with a CCA rate of 25 percent. The lease payments are $400,000 per year for the next five years, with payments made at the beginning of each year. There is no maintenance cost, and the expected market value of the bus after five years is zero. Assuming the lease qualifies as an operating lease and the cost of borrowing is 5 percent should Nash Business School lease the bus or buys it? Universities do not pay tax. DRAFT/STUDY ...
From the equation of exchange, MV = PY

From the equation of exchange, MV = PY, we know that spending growth (M + u) equals inflation A+ Real growth. Recall from the chapter that in the long run (1) the inflation rate is found where the AD curve intersects the LRAS cur (reading off the vertical axis) and (2) the expected inflation rate is found where the short-run aggregate supply curve intersects the LRAS curve. With these things in mind, assume that the Solow growth rate is 3%. If spending growth equals 4%, what will n equal in the long run? What will En equal? T = Ex= What can you say about inflation (1) and ...

What Clients Say About Us

Copyright © 2012 - 2024 Apaxresearchers - All Rights Reserved.

WhatsApp us