[MACRS, Modified Accelerated Cost Recovery System table required]
12. Carolina Trucking Company (CTC) is evaluating a potential lease
agreement on a truck that costs $40,000 and falls into the MACRS 3-year
class. The loan rate would be 10 percent and would be amortized over
the 4-year period, if CTC decided to borrow money and buy the asset
rather than lease it. The loan payments would be made at the end of the
year. The truck has a 4-year economic life, and its estimated residual
value is $10,000. If CTC buys the truck, it would purchase a
maintenance contract that costs $1,000 per year, payable at the end of
each year. The lease terms, which include maintenance, call for a
$10,000 lease payment at the beginning of each year. CTC's tax rate is
40 percent. Should the firm lease or buy and why?
13. Furman Industries is negotiating a lease on a new piece of equipment
which would cost $100,000 if purchased. The equipment falls into the
MACRS 3-year class, and it would be used for three years and then sold,
because Furman plans to move to a new facility at that time. It is
estimated that the equipment could be sold for $30,000 after three years
of use. A maintenance contract on the equipment would cost $3,000 per
year, payable at the beginning of each of the three years of usage.
Conversely, Furman could lease the equipment for three years for a lease
payment of $29,000 per year, payable at the beginning of each year. The
lease would include maintenance. Furman is in the 20 percent tax
bracket, and it could obtain a three-year simple interest loan to
purchase the equipment at a before-tax cost of 10 percent. Furman
should do what and why?
60. Suppose the December CBOT Treasury bond futures contract has a
quoted price of 80-07. What is the implied annual interest rate
inherent in the futures contract?
61. Suppose the December CBOT Treasury bond futures contract has a
quoted price of 80-07. If annual interest rates go up by 1 percentage
point, what is the gain or loss on the futures contract (assume $1,000
par value)?
Business Homework Solutions
#30356
Lease or Buy; Modified Accelerated Cost Recovery System; Implied Annual Interest Rate; Treasury Bond Futures Contract
[MACRS, Modified Accelerated Cost Recovery System table required]
12. Carolina Trucking Company (CTC) is evaluating a potential lease agreement on a truck that costs $40,000 and falls into the MACRS 3-year class. The loan rate would be 10 percent and would be amortized over the 4-year period, if CTC decided to borrow money and buy the asset rather than lease it. The loan payments would be made at the end of the year. The truck has a 4-year economic life, and its estimated residual value is $10,000. If CTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment at the beginning of each year. CTC's tax rate is 40 percent. Should the firm lease or buy and why?
13. Furman Industries is negotiating a lease on a new piece of equipment which would cost $100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for three years and then sold, because Furman plans to move to a new facility at that time. It is estimated that the equipment could be sold for $30,000 after three years of use. A maintenance contract on the equipment would cost $3,000 per year, payable at the beginning of each of the three years of usage. Conversely, Furman could lease the equipment for three years for a lease payment of $29,000 per year, payable at the beginning of each year. The lease would include maintenance. Furman is in the 20 percent tax bracket, and it could obtain a three-year simple interest loan to purchase the equipment at a before-tax cost of 10 percent. Furman should do what and why?
60. Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. What is the implied annual interest rate inherent in the futures contract?
61. Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1 percentage point, what is the gain or loss on the futures contract (assume $1,000 par value)?
The solution provides answers to two questions on leasing and two questions on Treasury Bond Futures
What is this?
By OTA - Overall OTA Rating
Pushkal Kumar Pandey, MBA - 4.9/5
Purchase Cost Now
$2.19 CAD (was ~$11.97)
Included in Download
- Plain text response
- Attached file(s):
- 30356-finance.xls
Why you can trust BrainMass.com
- Your Information is Secure
- Best Online Academic Help Service
- Students find real academic Success
- Futures- Implied interest rate on a Treasury bond - What is the implied interest rate on a Treasury bond ($100,000) futures contract that settled at 100-16? If interest rates increased by 1 percent, what would be the contract's new value?
- Implied Treasury bond rate - Looking at the Wall Street Journal you observe that the settlement price on a hypothetical 15-year, semiannual payment, 6% coupon bond is 109 9-32. If the bond has a $1,000 par value, what is the imp ...
- Trade Credit, implied annual yield of Treasury bond futures, exchange rate - 1. An Industry sells on terms of 3/10, net 30. Total sales for the year are $912,500. Forty percent of the customers pay on the 10th day and take discounts; the other 60% pay, on average, 40 days afte ...
- Treasury bond futures contract - implied annual yield; Forward rate - A Treasury bond futures contract has a settlement price of 89-8. What is the implied annual yield? Suppose that 1 Swiss franc could be purchased in the foreign exchange market for 60 U.S. cents ...
- Suppose the December CBOT treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1 percentage point, what is the gain or loss on the futures contract (assume $1,000 par value)? - Suppose the December CBOT treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1 percentage point, what is the gain or loss on the futures contract (assume $1 ...
