3232ex11-1 - 1,440.00 1,440.00 Ins&Tx 650.00 650.00...

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3232ex11-1 Lease vs. Buy Defender to be replaced: Old 1-ton forklift truck Company is operating at capacity with 2 shifts going 6 days/wk Buy: Gas powered forklift: 20,000 Life at 16 hr/day (yrs): 4 Overhaul req'd at yr 2: 1500 Salvage: 3000 Service Agree't (mth): 120 650 CCA Class 10: 30% Lease: Yearly cost w/ maint 10,200 4 yr contract 30 day cancellation Other info: Both options have equal fuel costs Short term debt rate: 10% (buy option would be debt financed) Corp. Tax Rate: 40% MARR: 12% Lease Statement Income 1 2 3 4 Expense 10,200 10,200 10,200 10,200 Taxable Income -10,200 -10,200 -10,200 -10,200 Income Tax -4,080 -4,080 -4,080 -4,080 Net Income -6,120 -6,120 -6,120 -6,120 NOTE: Net Income = Net Cash Flow PE(12%) -18,589 How would cash flow change for an up-front lease payment?
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Salvage 3000 Annual debt payment: $6,309.42 Year 0 1 2 3 4 Income Statement Revenue 0 0 0 0 Expenses Maint 1,440.00 1,440.00
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Unformatted text preview: 1,440.00 1,440.00 Ins&Tx 650.00 650.00 650.00 650.00 Overhaul 1,500.00 Interest 10% 2,000.00 1,569.06 1,095.02 573.58 CCA 30% 3,000.00 5,100.00 3,570.00 2,499.00 Taxabe Income-7,090.00-10,259.06-6,755.02-5,162.58 Income Tax 40%-2,836.00-4,103.62-2,702.01-2,065.03 Net Income-4,254.00-6,155.44-4,053.01-3,097.55 Cash Flow Statement Operating Activities Net income-4,254.00-6,155.44-4,053.01-3,097.55 CCA 3,000.00 5,100.00 3,570.00 2,499.00 Investment Activities Machines -20,000.00 3,000.00 Disposal Tax Effect 1,132.40 Finance Activities Principal 20,000.00-4,309.42-4,740.36-5,214.39-5,735.83 Net Cash Flow 0.00-5,563.42-5,795.79-5,697.41-2,201.98 UCC(5) 20,000.00 17,000.00 11,900.00 8,330.00 5,831.00 D.Balance 20,000 15,690.58 10,950.23 5,735.83 0.00 PE(12%)-15,042.41 Should Buy...
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3232ex11-1 - 1,440.00 1,440.00 Ins&Tx 650.00 650.00...

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