680 part 6 table 163 special topics in managerial

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: l Topics in Managerial Finance A Comparison of the Cash Outflows Associated with Leasing versus Purchasing for Roberts Company Leasing Purchasing Present value factorsa (2) Present value of outflows [(1) (2)] (3) After-tax cash outflowsb (4) Present value factorsa (5) Present value of outflows [(4) (5)] (6) End of year After-tax cash outflows (1) 1 $3,600 .943 $ 3,395 $4,286 .943 $ 4,042 2 3,600 .890 3,204 3,278 .890 2,917 3 3,600 .840 3,024 4,684 .840 3,935 4 3,600 .792 2,851 5,527 .792 4,377 5 7,600c .747 5,677 5,714 .747 PV of cash outflows $18,151 PV of cash outflows 4,268 $19,539 aFrom Table A–2, PVIF, for 6% and the corresponding year. column 7 of Table 16.2. cAfter-tax lease payment outflow of $3,600 plus the $4,000 cost of exercising the purchase option. bFrom The techniques described here for comparing lease and purchase alternatives may be applied in different ways. The approach illustrated by the Roberts Company data is one of the most straightforward. It is important to recognize that the lower cost of one alternative over the ot...
View Full Document

Ask a homework question - tutors are online