You work for a nuclear research laboratory that is contemplating leasing a diagn

Question

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $7,610,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $2,275,000 per year for four years. Assume that the tax rate is 35 percent.

  

Suppose the entire $7,610,000 purchase price of the scanner is borrowed. The rate on the loan is 8 percent, and the loan will be repaid in equal annual installments.

  

Calculate the amount of annual loan repayment. (Round your answer to 2 decimal places. (e.g., 32.16))

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $7,610,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $2,275,000 per year for four years. Assume that the tax rate is 35 percent.

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $7,610,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it wil actually be completely valueless in four years. You can lease it for $2,275,000 per year for four years Assume that the tax rate is 35 percent. Suppose the entire $7,610,000 purchase price of the scanner is borrowed. The rate on the loan is 8 percent, and the loan will be repaid in equal annual installments Calculate the amount of annual loan repayment. (Round your answerto 2 decimal places. (e.g 32.16)) Payment Complete the schedules given below and calculate the NAL. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) Amortization Beginning Balance Total Paymen Interest Payment Principal Paymen Ending Balance Year 4 Cash flows Aftertax Loan Payment Total Cash Flovw Year OCF NAL

Explanation / Answer

PV = x * [1-(1+i)ˆ-n]/i

where x = annual payment

=>

7610000 = x * [1-(1+8%)ˆ-4]/8%

=>

annual payment x = 2297617.33

b)

Beginning Balance Interest Principal Ending Balance 1 $7,610,000.00 $548,037.95 $1,681,350.13 $5,928,649.87 2 $5,928,649.87 $408,486.71 $1,820,901.37 $4,107,748.51 3 $4,107,748.51 $257,352.78 $1,972,035.30 $2,135,713.23 4 $2,135,713.23 $93,674.84 $2,135,713.24 $0.00

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