National Co. is considering leasing or purchasing a small aircraft to transport executives between manufacturing facilities and the main administrative headquarters. The firm is in the 40 percent tax bracket and its after-tax cost of debt is 7 percent. The estimated after-tax cash flows for the lease and purchase alternatives are given below: After-tax cash flow Lease -64,329 -64,329 -64,329 -64,329 64,329 End of year Purchase -68,454 -59,110 -63,596 -66,633 30,056 1 3 4
National Co. is considering leasing or purchasing a small aircraft to transport executives between manufacturing facilities and the main administrative headquarters. The firm is in the 40 percent tax bracket and its after-tax cost of debt is 7 percent. The estimated after-tax cash flows for the lease and purchase alternatives are given below: After-tax cash flow Lease -64,329 -64,329 -64,329 -64,329 64,329 End of year Purchase -68,454 -59,110 -63,596 -66,633 30,056 1 3 4
Cornerstones of Cost Management (Cornerstones Series)
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ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
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Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...
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Which alternative will you recommend and what is the difference in the
![National Co. is considering leasing or purchasing a small aircraft to transport
executives between manufacturing facilities and the main administrative
headquarters. The firm is in the 40 percent tax bracket and its after-tax cost of debt is
7 percent. The estimated after-tax cash flows for the lease and purchase alternatives
are given below:
After-tax cash flow
Lease
-64,329
-64,329
-64,329
-64,329
64,329
End of year
Purchase
-68,454
-59,110
-63,596
-66,633
30,056
1
3
4
5.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6feb023c-e6cf-451f-b7cc-4ba1be8fece6%2F2803b1a2-5cef-421e-a99e-b5fc429949a3%2Fctg94lp_processed.png&w=3840&q=75)
Transcribed Image Text:National Co. is considering leasing or purchasing a small aircraft to transport
executives between manufacturing facilities and the main administrative
headquarters. The firm is in the 40 percent tax bracket and its after-tax cost of debt is
7 percent. The estimated after-tax cash flows for the lease and purchase alternatives
are given below:
After-tax cash flow
Lease
-64,329
-64,329
-64,329
-64,329
64,329
End of year
Purchase
-68,454
-59,110
-63,596
-66,633
30,056
1
3
4
5.
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