Required: a. Harbor computes ROI using beginning-of-the-year net assets. What will the divislonal ROI be for year 1 assuming Harbor retains the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) b. What would divisional ROI be for year 1 assuming Harbor disposes of the leased machine? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the leased machine?
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- Grouper Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $260,015, and its unguaranteed residual value at the end of the lease term is estimated to be $20,500. National will pay annual payments of $37,300 at the beginning of each year. Grouper incurred costs of $195,000 in manufacturing the equipment and $4,100 in sales commissions in closing the lease. Grouper has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%.The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $320,000. Of this amount, $260,000 is subject to five-year MACRS depreciation. The balance is in nondepreciable property. The contract covers six years; at the end of six years, the nondepreciable assets will be sold for $60,000. The depreciated assets will have zero resale value. Use Table 12-12. The contract will require an additional investment of $59,000 in working capital at the beginning of the first year and, of this amount, $39,000 will be returned to the Spartan Technology Company after six years. The investment will produce $91,000 in income before depreciation and taxes for each of the six years. The corporation is in a 25 percent tax bracket and has a 8 percent cost of capital. a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value b. Should…The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $320,000. Of this amount, $260,000 is subject to five-year MACRS depreciation. The balance is in nondepreciable property. The contract covers six years; at the end of six years, the nondepreciable assets will be sold for $60,000. The depreciated assets will have zero resale value. Use Table 12-12. The contract will require an additional investment of $59,000 in working capital at the beginning of the first year and, of this amount, $39,000 will be returned to the Spartan Technology Company after six years. The investment will produce $91,000 in income before depreciation and taxes for each of the six years. The corporation is in a 25 percent tax bracket and has a 8 percent cost of capital. a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.) X Answer is complete but…
- ABC can either purchase the machine for $225,000 or lease it from KLease for 12 annual lease payments (paid at the beginning of the year) of $26,000. The machine has CCA rate of 30%. The salvage value is expected to be $12,500. ABC does not have any other asset in the asset class and KLease always has a positive UCC in the asset class. ABC and KLease have cost of debt of 9% and 5%% respectively. KLease pays the statutory corporate tax rate of 25% and ABC only pays 15%. a) Calculate the NPV of leasing for ABC and KLease. b) What are the minimum and maximum annual lease payments that make leasing acceptable to bothKingbird Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $304,659, and its unguaranteed residual value at the end of the lease term is estimated to be $19.400. National will pay annual payments of $40,800 at the beginning of each year. Kingbird incurred costs of $164,100 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Kingbird has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessor. This is a sales-type lease Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg. 5.275) (1) Lease receivable S (2) Sales price S (3) Cost of sales $George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $299,140, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in sales commissions in closing the lease. George has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Instructions a. Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items. 1. Lease receivable. 2. Sales price. 3. Cost of goods sold. b. Prepare a 10-year lease amortization schedule for George, the lessor. c. Prepare all of the lessor's journal entries for the first year.
- Avalanche Company manufactures a computer with an estimated economic life of 12 years andleases it to Hurricanes Company for a period of 10 years. The normal selling price of thecomputer is $206,633, and its unguaranteed residual value at the end of the lease term to be$10,000. Hurricanes will pay annual payments of $30,000 at the beginning each year and allmaintenance, insurance, and taxes. Avalanche incurred costs of $135,000 in manufacturing thecomputer. Avalanche determined that the collectability of the lease payments is reasonablypredictable that no additional cost will be incurred and that the implicit rate of interest is 10%. 1.Prepare a 10-year lease amortization schedule for the lessor. (Must use Excel) 2. Prepare all of the lessor’s journal entries for the first, second, and third years (Show allcomputations) 3. Assume that Hurricanes Company has an incremental borrowing rate of 10%, prepare a 10-year lease amortization schedule. (Must use Excel) 4.Prepare all of the…The owner of an industrial warehouse receives US$700,000. per year for leases. Monthly operation and maintenance expenses are US 160D0. The remaining useful life of the building is 9 years, at the end of which the building can be sold for US$5,000.0G0 The building has already been fully depreciated, also consider the 15% employee participation and a tax on 10% rent.The project to convert the infrastructure into an office complex that will generate annual revenues of US$600.0G0 and annual operation and maintenance costs representing 35% of profits is being studied.To do this, U5 1,000,000 must be invested in the remodeling of the building that lasts two years (equal expense each year). The total of the improvements can be depreciated over 7 years straight line, with no residual value. The remodeling will allow the building to be used for 7 years, at the end of which it can be sold for 3,000,000 Perform incremental cash flow in excel and graph with bar chart.Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.
- Crane Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Cheyenne Airlines for a period of 10 years. The normal selling price of the equipment is $252,640, and its unguaranteed residual value at the end of the lease term is estimated to be $21,300. Cheyenne will pay annual payments of $37,500 at the beginning of each year. Crane incurred costs of $173,900 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Crane has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Cheyenne Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Your Answer Correct Answer (Used) Your answer is correct. Discuss the nature of this lease in relation to the lessee. This is a finance lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer…Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a sales-type lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final…Northwest Lumber Company needs to expand its facilities. To do so, the firm must acquire a machine costing $200,000. The machine can be leased or purchased. The firm is in the 27% tax bracket, and its after-tax cost of debt is 9%. The terms of the lease and purchase plans are as follows: Lease The leasing arrangement requires end-of-year payments of $59,000 over five years. All maintenance costs will be paid by the lessor; insurance and other costs will be borne by the lessee. The lessee will exercise its option to purchase the asset for $20,000 at termination of the lease. Ignore any future tax benefit associated with the purchase of the equipment at the end of year 5 under the lease option. Purchase If the firm purchases the machine, its cost of $200,000 will be financed with a five-year, 17% loan requiring equal end-of-year payments of $62,513. The machine will be depreciated under MACRS using a 5-year recovery period. (See LOADING... for the applicable depreciation percentages.)…