Purchase Solution

financing option

Not what you're looking for?

Ask Custom Question

United Hospital has received a leasing proposal from Leasing, Inc., for a Siemens cardiac catheterization unit. The terms are:

â?¢ Five-year lease
â?¢ Annual payments of $200,000 payable one year in advance
â?¢ Payment of property tax estimated to be $23,000 annually
â?¢ Renewal at end of year 5 at fair market value

Alternatively, United Hospital can buy the catheterization unit for $725,000. This purchase would require United Hospital to debt-finance this equipment. It anticipates a bank loan with an initial down payment of $125,000 and a three-year term loan at 16 percent with equal principal payments. The residual value of the equipment at year 5 is estimated to be $225,000. The lease is treated as an operating lease. Depreciation is calculated on a straight-line basis. Assuming a discount rate of 14 percent, what financing option should United Hospital select? Assume that there is no reimbursement of capital costs.

Purchase this Solution
Solution Summary

What financing option should United Hospital select?

Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Mortgage comparison

    Links are provided for financing option research.

  • Capital Structure: Stephens Security

    Also the cost of issuance for the first option is double the cost of issuance for the second option. Hence the second option would be more appropriate for the financing decision. The solution examines capital structures for Stephens Security.

  • Important information about Optimal Financing

    The financing by local banks in the foreign country option does not result value to the parent at all since the interest is paid to the local bank. The solution explains optimal financing.

  • Loaning to Purchase an Automobile

    You can obtain 5.9% financing for 60 months through your bank. Which option is a better deal? Explain. First consider the rebate & bank loan option.

  • Financing Options

    From this we see that the implied interest rate in option B is 7.52% while the implied interest rate in option C is 9.16%. This solution analyzes financing options available in purchasing a car.

  • Financing options for a start-up company

    In addition, the company owners can also get the debt financing from their friends or relatives. The second form of financing option is equity financing.

  • Pros and Cons of a Debt Financing Option

    The pros and cons of a debt financing option are explained.

  • Purchasing auto for $34,633 @ 0% financing for 72 months or

    The dealer offers you 0% financing for 72 months or a $3,076 rebate. You can obtain financing for 72 months at the local bank. Which option should you choose?

  • Assorted problems in Finance and Accounting

    =396000 In the case of Conservative financing, long term financing will be preferred.

  • Loans vs. bank notes

    Which financing option do you recommend and why? Prime rate is 5%. Explain the relevance of the matching method in making this decision.

View More Related Solutions