WhatsApp +1 (332) 244-5747

Companys acquisition

Get your custom paper done at low prices

Y

275 words/page

Y

Double spacing

Y

Free formatting (APA, MLA, Chicago, Harvard and others)

Y

12 point Arial/Times New Roman font

Y

Free title page

Y

Free bibliography & reference

The X company is considering the acquisition of a new processor that has an estimated installed cost of $57,000. The processor has an expected life of 5 years and will be depreciated over a 5 year ACRS life to a zero salvage value. However, it is expected that the processor can be sold at that time for $6,000. If purchased, the entire $57,000 would be borrowed at an interest rate of 9%. A capital budgeting analysis results in a positive NPV for the project. An alternative to purchase is to lease the asset for an annual lease payment of $13,500. The lease includes maintenance services estimated to cost Company C $3,000 per year if they were not included in the lease payment. Company C’s cost of capital is 11% and its marginal tax rate is 34%. Evaluate the purchase and lease options and make a recommendation of which is preferred.¬†ANSWERSOption 1 – Buying a processorCost57,000.00Life5.00 yrsDepreciation11,400.00Salvage Value6,000.00Tax34%Depreciation Tax Shield3,876.00Cash Outflow57000Cash Inflow3876Pv of…

TESTIMONIALS

What Students Are Saying

Outstanding service, thank you very much.

Undergraduate Student

English, Literature

Awesome. Will definitely use the service again.

Master's Student

Computer Science