This paper circulates around the core theme of Craxton Engineering will either purchase or lease a new $756,000 fabricator. If purchased, the fabricator will be depreciated on a straight-line basis over 7 years. Craxton can lease the fabricator for $130,000 per year for 7 years together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
FIN516 WEEK 5 HOMEWORK Problem 25-6 on Purchase versus Lease based on Chapter 25 Craxton… 1 answer below » FIN516 WEEK 5 HOMEWORK Problem 25-6 on Purchase versus Lease based on Chapter 25 Craxton Engineering will either purchase or lease a new $756,000 fabricator. If purchased, the fabricator will be depreciated on a straight-line basis over 7 years. Craxton can lease the fabricator for $130,000 per year for 7 years. Craxtons tax rate is 35%. (Assume the fabricator has no residual value at the end of the 7 years.) a. What are the free cash flow consequences of buying the fabricator if the lease is a true tax lease? b. What are the free cash flow consequences of leasing the fabricator if the View complete question » FIN516 WEEK 5 HOMEWORK Problem 25-6 on Purchase versus Lease based on Chapter 25 Craxton Engineering will either purchase or lease a new $756,000 fabricator. If purchased, the fabricator will be depreciated on a straight-line basis over 7 years. Craxton can lease the fabricator for $130,000 per year for 7 years. Craxtons tax rate is 35%. (Assume the fabricator has no residual value at the end of the 7 years.) a. What are the free cash flow consequences of buying the fabricator if the lease is a true tax lease? b. What are the free cash flow consequences of leasing the fabricator if the lease is a true tax lease? c. What are the incremental free cash flows of leasing versus buying? Problem 25-7 on Purchase versus Lease based on Chapter 25 Riverton Mining plans to purchase or lease $220,000 worth of excavation equipment. If purchased, the equipment will be depreciated on a straight-line basis over 5 years, after which it will be worthless. If leased, the annual lease payments will be $55,000 per year for 5 years. Assume Rivertons borrowing cost is 8%, its tax rate is 35%, and the lease qualifies as a true tax lease. a. If Riverton purchases the equipment, what is the amount of the lease-equivalent loan? b. Is Riverton better off leasing the equipment or financing the purchase using the lease equivalent loan? c. What is the effective after-tax lease borrowing rate? How does this compare to Rivertons actual after-tax b
