Leasing Assignment

New Oil Co. is considering replacement of their highly specialised drilling equipment. The new equipment is computer assisted and therefore provides New Oil with $2.9 million in annual pre-tax savings. New Oil can purchase the equipment at $9.7 million which will be depreciated straight-line to zero over five years. The local bank is prepared to provide New Oil with $2.9 million loan at an interest rate of 9 percent with annual repayments spread over five years. Alternatively, New Oil can lease this equipment from ABC Leasing The lease contract will require an annual payment of $2.15 million per year payable at the beginning of each year for five years

Required:

a) Assuming a tax rate of 34% for New Oil, calculate the NAL of leasing rather than buying this equipment Should New Oil lease or buy this equipment? (10 marks)

b) What is the maximum lease payment that would be acceptable to New Oil? (3 marks) Get Finance homework help today

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Australia Assessments
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Military
excellent work
Customer 456821, June 18th, 2022
Business and administrative studies
Impeccable.
Customer 459947, April 6th, 2022
Education
yes I did
Customer 453969, February 11th, 2020
Education
Excellent.
Customer 462495, March 28th, 2022
lesson plan
great work
Customer 454025, April 10th, 2020
Business and administrative studies
GOOD work.
Customer 463105, June 27th, 2022
Human Resources Management (HRM)
It's great. I recommend the writer.
Customer 454223, April 9th, 2020
Nursing
I received my paper early and it is very well written. Thank you!!
Customer 462821, April 6th, 2022
project management
thank you
Customer 462327, November 16th, 2022
Other
Instructions followed.
Customer 462823, April 13th, 2022
Business and administrative studies
Excellent.
Customer 458115, May 16th, 2022
IT
Excellent.
Customer 452441, April 6th, 2022
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat