Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 10 Jul 2017 My Price 11.00

Sonic Transport Pty Ltd

Question 2 (6 marks) Sonic Transport Pty Ltd, a privately owned, medium-sized logistics provider, is considering the possibility of leasing a $492,000 truck-servicing facility. This facility cleans and services commercial road vehicles used on long-haul trips. A financing company has offered to structure a finance lease with the first payment of $90,000 due today and with a further 4 instalments of $90,000 at the beginning of each of the next four years. According to the lease agreement, Sonic has the option to purchase the facility at $115,000 at the end of the lease in 5 years time. Alternatively, Sonic Transport can obtain a loan at an interest of 12% p.a. (before tax) to buy the facility. If bought, the facility then has to be depreciated at a prime cost rate of 20% over a useful life of 5 years. After the 5 years, the facility is estimated to have a salvage value of $150,000. Sonic is subject to a 30% tax rate. Any tax benefits (received or foregone) would be incurred at the end of the year of income. Advise Sonic on the following: a. Using an acceptable DCF technique, should the business lease or buy the facility? (5 marks) b. Can Sonic use promissory notes or other forms of short-term funds to finance the truck-servicing facility? (1 marks) Limit response your response to two A4 pages. Ensure that it is clear how figures are calculated

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Maurice Tutor
(5)
Status NEW Posted 10 Jul 2017 12:07 PM My Price 11.00

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