Assignment 21-1b: Cost of Owning and Cost of Leasing Cost of owning and cost of
ID: 2759721 • Letter: A
Question
Assignment 21-1b: Cost of Owning and Cost of Leasing
Cost of owning and cost of leasing tables are reproduced below.
Required:
Using the appropriate table from the Chapter 12 Appendix, record the present value factor at 10% for each year and compute the present value cost of owning and the present value of leasing. Which alternative is more desirable at this interest rate? Do you think your answer would change if the interest rate were six percent instead of ten percent?
Cost of Owning- Anywhere Clinic - Comparative Present Value
For-Profit Cost of Owning:
Net Cash Flow
(48,750)
2,500
2,500
2,500
2,500
Present value factor
Present value answers =
Present value cost of owning =
Cost of Leasing- Anywhere Clinic - Comparative Present Value
For-Profit Cost of Owning:
Net Cash Flow
(8,250)
(8,250)
(8,250)
(8,250)
(8,250)
Present value factor
Present value answers =
Present value cost of owning =
Assignment 22-1
Required:
Locate several health care organizations’ mission, value and vision statements. Use public sources with no privacy concerns.
Then fit the statements you have discovered into the chapter’s categories of “recognizing a special status or focus within the statements”; financial emphasis within the statements”; and/or “relaying the message”.
For-Profit Cost of Owning:
year 0 year 1 year 2 year 3 year 4 year 5Net Cash Flow
(48,750)
2,500
2,500
2,500
2,500
5,000Present value factor
Present value answers =
Present value cost of owning =
Explanation / Answer
For - Profit Cost of Owning
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Net Cash Flow
$(48,750.00)
$ 2,500.00
$ 2,500.00
$ 2,500.00
$ 2,500.00
$ 5,000.00
Present value factor @ 10 %
0.909
0.826
0.751
0.683
0.621
0.564
Present value answers
$(44,318.18)
$ 2,066.12
$ 1,878.29
$ 1,707.53
$ 1,552.30
$ 2,822.37
Present value cost of owning =
PV of Cash Outflow - PV of Cash Inflow
=
$(34,291.57)
Hence Present value of cost of owning =
$ 34, 291.57
Cost of Leasing- Anywhere Clinic
For - Profit Cost of Owning
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Net Cash Flow
$ (8,250.00)
$(8,250.00)
$(8,250.00)
$(8,250.00)
$(8,250.00)
$(8,250.00)
Present value factor @ 10 %
0.909
0.826
0.751
0.683
0.621
0.564
Present value answers
$ (7,500.00)
$(6,818.18)
$(6,198.35)
$(5,634.86)
$(5,122.60)
$(4,656.91)
Present value cost of owning =
$ (35,930.90)
Hence Present value of cost of owning =
$35,930.90
if the interest rate were 6 % instead of 10 %,
For - Profit Cost of Owning
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Net Cash Flow
$(48,750.00)
$ 2,500.00
$ 2,500.00
$ 2,500.00
$ 2,500.00
$ 5,000.00
Present value factor @ 6 %
0.943
0.890
0.840
0.792
0.747
0.705
Present value answers
$(45,990.57)
$ 2,224.99
$ 2,099.05
$ 1,980.23
$ 1,868.15
$ 3,524.80
Present value cost of owning =
PV of Cash Outflow - PV of Cash Inflow
=
$(34,293.34)
Hence Present value of cost of owning =
$ 34,293.34
Cost of Leasing- Anywhere Clinic
For - Profit Cost of Owning
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Net Cash Flow
$ (8,250.00)
$(8,250.00)
$(8,250.00)
$(8,250.00)
$(8,250.00)
$(8,250.00)
Present value factor @ 6 %
0.943
0.890
0.840
0.792
0.747
0.705
Present value answers
$ (7,783.02)
$(7,342.47)
$(6,926.86)
$(6,534.77)
$(6,164.88)
$(5,815.92)
Present value cost of owning =
$ (40,567.93)
Hence Present value of cost of owning =
$40,567.93
For - Profit Cost of Owning
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Net Cash Flow
$(48,750.00)
$ 2,500.00
$ 2,500.00
$ 2,500.00
$ 2,500.00
$ 5,000.00
Present value factor @ 10 %
0.909
0.826
0.751
0.683
0.621
0.564
Present value answers
$(44,318.18)
$ 2,066.12
$ 1,878.29
$ 1,707.53
$ 1,552.30
$ 2,822.37
Present value cost of owning =
PV of Cash Outflow - PV of Cash Inflow
=
$(34,291.57)