Even complicated and confusing topics will be easily developed and covered if you request our help writing an essay. Place an order today!

Assignment 2: Lease vs. Buy

Your employer, Barnaby Well Company, is considering the acquisition of a new drill truck and your boss has asked you to evaluate the decision that she has made to buy the truck.  The truck has a purchase price of $60,000 and a useful life of 4 years and a zero salvage value.  Barnaby can borrow to buy the truck for $60,000 or lease the truck for $15,000 for 4 years, paid at the beginning of each year.

If debt is used to buy the truck, Barnaby can borrow at 8% annual interest, with payments at the end of each year. The marginal tax rate for the firm is 40%.  The asset is classified as a 3-year cost recovery asset for depreciation purposes.  According to the current tax laws, Barnaby is allowed to use MACRS depreciation with 30% rate for year one, 45% for year two, 20% for year three and 5% for year four.  There will be no salvage value at the end of the fourth year.

Questions:

  1. What is the annual cost, before any tax considerations, of the lease option?  Are there any tax considerations and if so, what is the after tax annual cost of the lease agreement?  Explain your answer.
  2. What is the total cost of leasing the truck today?
  3. What are the annual cash flows if the truck is purchased with debt financing?
  4. What is the cost of purchasing the truck with debt financing today?
  5. Make a recommendation to your boss as to whether the company should buy or lease the truck.  Justify your recommendations.

Present your analysis of the assigned problems in Excel format. Enter non-numerical responses in the same worksheet using textboxes.

By  Week 4, Day 7 deliver your assignment to the  M4: Assignment 2 Dropbox.

 

 

Do you need a similar assignment done for you from scratch? We have qualified writers to help you. We assure you an A+ quality paper that is free from plagiarism. Order now for an Amazing Discount!
Use Discount Code “Newclient” for a 15% Discount!

NB: We do not resell papers. Upon ordering, we do an original paper exclusively for you.

testimonials icon
PRyC WP: Add custom content to bottom of post/page: Standard Content START use times New Roman font 12...
testimonials icon
/*! elementor - v3.6.5 - 27-04-2022 */ .elementor-heading-title{padding:0;margin:0;line-height:1}.elementor-widget-heading .elementor-heading...
testimonials icon
Watch the documentary ″The Bridge″ by Eric Steele and write a brief 2-3 summary of your thoughts and h...
testimonials icon
1. The Fed and Monetary Policy Monetary policy is the action taken by the Federal Reserve to expand or contract the money supply and i...
testimonials icon
Assignment 3: Using Leadership to Improve Ethical Performance Leader you would like to interview: Chris Lemons  ...
testimonials icon
Case Study: The Rise of India's Drug Industry (reference article online for further detail on case story)1. How might US pharmaceutic...
testimonials icon
Minimum of 300 words with at least 2 peer review reference What are the effects of nutritional deficits on cellular functioning and tissue hea...
testimonials icon
Running head: POVERTY1Social Justice Link to PovertyNameCourseProfessorDatePOVERTY2Social Justice Link to PovertyIntroductionPhilosophers and politic...
testimonials icon
“Hispanics in America Final PaperOVERVIEW The Final Paper presents an overview of the topics of the course framed within one of the peo...
testimonials icon
Order Grade A+ Academic Papers Instantly!...

Other samples, services and questions:

Calculate Price

When you use PaperHelp, you save one valuable — TIME

You can spend it for more important things than paper writing.

Approx. price
$65
Order a paper. Study better. Sleep tight. Calculate Price!
Created with Sketch.
Calculate Price
Approx. price
$65