Cost Of Machine Case Study
Introduction
The Company, Estrella has decided to install a new machine. Management is considering buying and leasing in the form of financial statements, so costs affect net profit of the company. In deciding whether to lease or purchase of the machine it is necessary to learn what each option, and the cash flows of the parameters to select will give the highest return of investment-related cash flow. Net present value (NPV) is used to decide whether to buy or lease of machines, and represents the cash flow associated with each option's spreadsheet model to help. Here is the information considered by the management of the machine.
Cost of machine: € 20,000.00
Useful life: Five (5) Years
Trade in value € 4,000.00
Additional cash profit for the next five year € 8,000.00 p.a
If purchase the machine for cash, by borrowing the money from the bank, interest cost. 14% p.a before tax € 2,800.00 p.a
If Lease the machine under agreement, at the end of each year for the next five years € 4,800.00 p.a
Corporate tax 35%
Writing down allowance 25%
Depreciation per year:-
Cost of machine – Trade in value
5 years …show more content…
This is especially so when the equipment has a long service life, are less likely to become out of date in the near future, such as Office furniture, or agricultural machinery. Be allowed to fully charge a first year cost of the new asset purchase. In 2012 and 2013, you can deduct up to $500,000 of equipment (need to be eliminated, if your service invested more than $ 2 million of equipment in any one year). For example, if you are in the 25% tax, buy $100,000 of equipment, net cost to you of $ $75,000 this year. Or although not all the equipment purchases are entitled for almost all business equipment tax depreciation deductions. (Some are not in conformity with article deduction of asset is real estate inventory for resale, as well as from close relatives buy
The Company, Estrella has decided to install a new machine. Management is considering buying and leasing in the form of financial statements, so costs affect net profit of the company. In deciding whether to lease or purchase of the machine it is necessary to learn what each option, and the cash flows of the parameters to select will give the highest return of investment-related cash flow. Net present value (NPV) is used to decide whether to buy or lease of machines, and represents the cash flow associated with each option's spreadsheet model to help. Here is the information considered by the management of the machine.
Cost of machine: € 20,000.00
Useful life: Five (5) Years
Trade in value € 4,000.00
Additional cash profit for the next five year € 8,000.00 p.a
If purchase the machine for cash, by borrowing the money from the bank, interest cost. 14% p.a before tax € 2,800.00 p.a
If Lease the machine under agreement, at the end of each year for the next five years € 4,800.00 p.a
Corporate tax 35%
Writing down allowance 25%
Depreciation per year:-
Cost of machine – Trade in value
5 years …show more content…
This is especially so when the equipment has a long service life, are less likely to become out of date in the near future, such as Office furniture, or agricultural machinery. Be allowed to fully charge a first year cost of the new asset purchase. In 2012 and 2013, you can deduct up to $500,000 of equipment (need to be eliminated, if your service invested more than $ 2 million of equipment in any one year). For example, if you are in the 25% tax, buy $100,000 of equipment, net cost to you of $ $75,000 this year. Or although not all the equipment purchases are entitled for almost all business equipment tax depreciation deductions. (Some are not in conformity with article deduction of asset is real estate inventory for resale, as well as from close relatives buy