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Amol Srivastava
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Big Sky Mining Company must install $1.5 million of new machinery

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Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply:   1. The machinery falls into the MACRS 3-year class. 2. Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance. 3. The firm's tax rate is 40%. 4. The loan would have an interest rate of 15%. 5. The lease terms call for $400,000 payments at the end of each of the next 4 years. 6. Assume that the company has no use for the machine beyond the expiration of the lease. The machine has an estimated residual value of $250,000 at the end of the 4th year.      What is the NALof the lease?

Hello deakins

 

Please advise the name of the book you are using: Title, author's name, and edition

 

Thank you

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Amol Srivastava, Accountant
Category: Finance
Satisfied Customers: 626
Experience: More than 4years + of industry experience ,CFA level2 cleared, Chartered Accountant from India
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