1-3 lease answer questions 1-4 based on the following information:A and B are mutually exclusive projects.The required rate of return is 14%.•The cutoff period is 2.5 years.YearProject AProject B0$1,000$1,0002001550250Z350300325060042003.2If the company applies the NPV decision, which project should be recommended?a Project A because it has NPV of $78.81b. Project A because it has NPV of $38.93c Project B because it has NPV of $40.97d. Project B because it has NPV of $100.40If the company applies the payback period decision, which project should berecommended?a. Project A because it has payback of 2.3 years.b. Project A because it has payback of 2.4 years.c. Project B because it has payback of 2.4 years.d. Project B because it has payback of 3.2 years.e. Neither of two projects is recommended.If the company applies the MIRR decision, which project should be recommended?a. Project A because it has MIRR of 15.09%.b. Project A because it has MIRR of 12.66%.Project 8 because it has MIRR of 15-15%d. Project & because it has MIRR of 12.66%company applies P (Profitability index) decision, which project should bmendedChos Pt of 1.078has Pf of 1099041

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Answered: lease answer questions 1-4 based on the…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 2P: Lease versus Buy Consider the data in Problem 19-1. Assume that RCs tax rate is 40% and that the...

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Hi, Please help to determine present value of lease payments (lessee) considering the following: Project 2.2 Topic: Leases Part 2 Illini leases another piece of equipment from Cubs Corporation under a four-year lease agreement on 1/1/20x1. The lease specifies annual payments on each 1/1 and the first payment of $10,000 is made on 1/1/20x1. The lease also specifies a 3% annual increase in the lease payments. The equipment has a fair value of $100,000 on 1/1/20x1. The expected useful life of the equipment is 10 years with no residual value. The equipment will be returned to Cubs at the end of the lease term. The implicit rate is 10%. Project 2.2 Part 2 Ledger Date Account Name Debit Credit 1/1/20x1 ROU assets [A] Lease obligation [B]
Problem 3-63 (Algo) CVP, Operating Leverage, and Margin of Safety (LO 3-1, 2, 4) Maryland Manufacturing (M2) produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts. The first (unit-rate lease) is one where M2 would pay $20 per unit produced, regardless of the number of units. The second lease option (flat-rate lease) is one where M2 would pay $450,000 annually, regardless of the number produced. The lease will run one year and the lease option chosen cannot be changed during the lease. All other lease terms are the same. M2 sells the part for $218 per unit and unit variable cost (excluding any machine lease costs) are $118. Annual fixed costs (excluding any machine lease costs) are $1,458,000. Required: a. What is the annual break-even level assuming 1. The unit-rate lease? 2. The flat-rate lease? b. At what annual volume would the operating profit be the same regardless of the royalty option chosen? c. Suppose M2 is…
Problem 3-63 (Algo) CVP, Operating Leverage, and Margin of Safety (LO 3-1, 2, 4) Maryland Manufacturing (M2) produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts. The first (unit-rate lease) is one where M2 would pay $20 per unit produced, regardless of the number of units. The second lease option (flat-rate lease) is one where M2 would pay $450,000 annually, regardless of the number produced. The lease will run one year and the lease option chosen cannot be changed during the lease. All other lease terms are the same. M2 sells the part for $218 per unit and unit variable cost (excluding any machine lease costs) are $118. Annual fixed costs (excluding any machine lease costs) are $1,458,000. Required: a. What is the annual break-even level assuming 1. The unit-rate lease? 2. The flat-rate lease? b. At what annual volume would the operating profit be the same regardless of the royalty option chosen? c. Suppose M2 is…
O e. $300,000 Jestion 3 For an operating lease, which statement is TRUE? ot yet swered Select one: ints out of O a. The Right of Use asset amortization amount will decrease each year. O b. Annual Lease Expense will be the amortization of the Right of Use asset less that year's interest expense. Flag question Oc. The recorded Lease Expense amount will be the same each year. O d. The annual amortization of the Right of Use asset will be debited to Amortization Expense each year. O e. To compute the cost of the Right of Use asset, the lessee will use the incremental rate, if known. estion 4 Indicate the type of Deferred Tax account created by Unearned Revenues and Accrued Revenues, respectively: yet wered Select one: nts out of O a. Asset, Asset O b. Liability, Asset O c.Asset, Liability O d. Liability, Liability Flag question stion 5 Which of the following requires intraperiod tax allocation? yet wered Select one: nts out of O a. Discontinued Operations Loss O b. Estimated Warranty…
Q6/ A project engineering is assigned to start up a new project in a city where a 5-year contract has been finalized the project. Two lease options are available each with a first cost, annual cost, overhaul cost, and deposit -return estimates shown in below. Determine which lease option should be selected on the basis of a present worth comparison, if the MARRás 20% per year. Location A Location B First cost,S - 400,000 Annual lease cost per year,S - 90,000 Overhaul cost in year 3 Overhaul cost in year 4 Deposit return,$ Lease term, years -70,000 60,000 5 - 320,000 - 110,000 -120,000 100,000 10
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12. Consider two mutually exclusive service projects. Which option is better if the interest rate is 12% and the required service period is 6 years (project repeatability can be assumed)? Project A: life 3 years -$1000 -$400 Project B: life 2 years -$800 -$200 -$200 +0 1 -$400 3. -$400 +200 a. Project A b. Project B c. Both are identical d. Impossible to decide
Company A leases computer servers to Company B for five years. At the end of the five years, Company B will assume ownership of the servers. Company B will then send the servers to one of their international locations. Which finance lease classification test does the scenario represent? O Alternative use O Transfer of ownership O Lease term O Purchase option
CHOOSE THE CORRECT ANSWER FROM THE CHOICES An asset with a market value of P1,000,000 is leased on January 1, 2019. Five annual lease payments are due each December 31 beginning December 31, 2019. The guaranteed residual value on December 31, 2023, the last day of the lease term, is P400,000. The lessor’s implicit interest rate is 8%. What is the annual lease payment?A. P200,000 B. P182,456 C. P168,910 D. P120,000
Lease versus Buy Consider the data in Problem 19-1. Assume that RCs tax rate is 40% and that the equipments depreciation would be 100 per year. If the company leased the asset on a 2-year lease, the payment would be 110 at the beginning of each year. If RC 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 RC lease or buy the equipment?
Firm X buys equipment for $10,000 and leases the equipment to firm A for $600 a year for four years. After four years, firm X expects to sell the asset for $11,000. What is the return that firm X earns on the lease? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest whole number. %

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