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Question: school 2 financial lease 20 points your firm is considering...

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School [2] Financial Lease (20 points) Your firm is considering leasing dedicated servers for cloud computing payments of $50,000 each with the first payment occurring immediately. The equi $240,000 to buy and would be straight-line depreciated to zero salvage value can borrow at 9% and the tax rate is 35%. Calculate the PV of leasing and the P alternatively, the lease PV. Questions: ual pment would cost The firm V of buying or, The lease calls for six ann in five years. Show after-tax interest rate Show annual depreciation charges Show tax shield on lease payments Show PV of leasing Show PV of buying Show Lease PV PV of leasing - PV of buying PV (leasing- buying) .Should the company lease or buy? Why? 4[2] Financial lease exercise (20 points) Cost of the servers Annual lease payment Tax rate Interest rate After-tax interest rate Annual depreciation schedule Annual depreciation Annual lease payments Leasing - Cash-flows Lease payments Tax shield on lease payments Cash-flow PV of lease 10 points Ownership - Cash-flows Cost of the drilling machine Depreciation tax shield Cash-flow PV of ownership 10 points PV of owning the asset-PV of leasing the asset: 10 points An alternative method for Lease PV: leasing cash-flows - ownership cash-flows 4 Lease PV Lease payments Tax shield on lease payments Cost of asset Depreciation tax shield Cash-flows Lease PV

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