Evolution of Employment Law

Write a 2-3 page summary of your research into laws that have impacted today’s workplace.

Introduction

Employment law, or labor law, governs the interactions and duties between employees and employers. The purpose of these laws is to ensure that workers are safe and treated fairly. The laws also serve to protect employers’ interests as well. Employment laws are primarily based on both federal and state constitutions and legislation.

Understanding employment law is extremely important for HR practitioners, all members of management, and employees as well. Employees should understand their rights in the workplace to ensure they are treated fairly; employers need to understand and abide by employment law guidelines to ensure that they promote a safe and fair workplace and to avoid employment-related legal action that can be very costly to the organization.

HR practitioners need to ensure the company operates within legal guidelines by monitoring programs and practices, and this assessment will help to strengthen your understanding of these topics.

A law cannot ensure that a behavior will change. Laws and behaviors are not fixed, and in order to study them it is necessary to put them in perspective. This assessment considers law in relation to workplace behaviors and shifts in demographics. Specifically, it looks at the foundation of U.S. law and the related legislation enacted to address the rights of U.S. citizens as they engage in workplace contracts and activities.

Events and inventions demanded workers develop different skill sets. As those forces of change arose, public pressure, under the banner of equal opportunity, influenced the workplace and the courts. In an agrarian society, one works on the land. In an industrialized society, one works in a union with an enterprise. In a service society, one works in relationship with other people.

As you look to the global workplace, you see participants in the labor contract at different stages of managing relationships. The U.S. laws of the eighteenth century were written in response to the laws of England’s domination. U.S. laws of the twenty-first century are written in direct response to the electorate of today—diverse in race, religion, age, gender, disability, marital status, and sexual orientation.

As you study the statistics, keep the legislative timeline in mind. Observe the direct relationship between the legislative process and the human factor. Test your intuitions in your own workplace and community. Do not hesitate to challenge the numbers. Look at the trends in the United States and place them in the context of a global labor pool and a global marketplace.

Preparation

To prepare for this assessment, use the Capella library and the Internet to research employment law, both from a historical perspective and in the present day. Focus your research on laws that have impacted today’s workplace.

Then, write a 2–3 page summary of your research into employment law. Complete the following:

  • Summarize two of the laws that you feel have the greatest impact in the workplace today, and provide a rationale to support your point of view.
  • Discuss two employment-related topic areas in which you believe the laws will change or evolve in the next 10 years.
  • Describe any trends or historical perspectives that support your position regarding the laws that will change or evolve in the next 10 years.

Additional Requirements

  • Written Communication: Written communication should be free of errors that detract from the overall message.
  • APA Formatting: Resources and citations should be formatted according to current APA style and formatting guidelines.
  • Font and Font Size: Times New Roman, 12 point, double-spaced. Use Microsoft Word to complete the assessment.
  • Length: A minimum of two pages, excluding title page and reference page (150–300 words per question).

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Examine the effect of the employment process on current work environments.
    • Summarize current legislation regarding workers’ rights.
  • Competency 2: Analyze trends and changes in the laws on diversity, gender, and harassment.
    • Describe any trends or historical perspectives that foreshadow probable change.
    • Anticipate future changes in the law.
    • Analyze the reasons why the law can be expected to evolve.
  • Competency 3: Apply the laws and safety issues in the workplace.
    • Analyze current employment laws affecting the workplace.
  • Competency 6: Communicate in a manner that is scholarly, professional, and consistent with expectations for members of the human resource profession.
    • Communicate in a manner that is scholarly, professional, and consistent with expectations for members of the human resource profession.

Screening and Selecting Internal Candidates

Write a 5-6 page report describing the process you used to select the best three candidates for CapraTek’s regional sales representative positions.

Introduction

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Recruiting candidates and selecting hires are two steps in a process of orienting people to new jobs. After the organization has trained a new hire, issues of retention, engagement, and development are considered.

Recruiting candidates is only the first step in the hiring process. Evaluating candidates, selecting those to interview, conducting interviews and background screenings, presenting a job offer, and onboarding the new employee are subsequent tasks.

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Preparation

To prepare for this assessment, complete the following:

Scenario

You have written a job description for CapraTek’s regional sales representative positions and determined job requirements. Now it is time to determine testing methods and choose the top three candidates to interview.

Requirements

After reviewing the CapraTek regional sales representative job description and requirements you developed for Assessment 5, use the Candidate Selection media piece (found under Multimedia, above) to review the candidates’ resumes. In a 5–6 page report, include the following in your explanation of the candidate selection process:

  • Explain why and when candidate background checks will be authorized.
    • Identify pre-employment screening tests for the position being recruited.
    • Articulate possible legal issues associated with screening candidates.
  • Select assessment methods to use based on the job being recruited and the budget available.
    • Develop the sequence in which methods will be used to screen applicants.
    • Explain how technology will impact choice of screening and selection methods.
  • Design a final candidate selection process for the position being recruited.
    • Describe the method chosen to make the final hiring decision.
    • Determine which candidates meet the basic job requirements.
    • Identify the top three candidates to interview for the position.
    • Explain your rationale for why the selected candidates should be interviewed.

Note: The requirements listed here generally describe proficient performance for each of the required criteria. To earn full points for each criterion, be sure to review the assessment scoring guide for details on what constitutes distinguished performance.

Additional Requirements

  • Times New Roman font, 12 pt. double-spaced.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 2: Assess approaches for recruiting, selecting, and retaining talent.
    • Design a final candidate selection process for the CapraTek position being recruited.
    • Identify pre-employment screening tests for a position being recruited.
    • Explain the purpose of performing candidate background checks for a position being recruited.
    • Explain why and when candidate background checks will be authorized.
    • Select assessment methods to use based on the job being recruited and the budget available.
    • Develop the sequence in which methods will be used to screen applicants.
    • Describe the method chosen to make the final hiring decision.
    • Determine which candidates meet the basic job requirements.
    • Identify the top three candidates to interview for the position.
    • Explain rationale for why the selected candidates should be interviewed.
  • Competency 3: Explore technology tools that support recruiting and staffing management.
    • Explain how technology will impact choice of screening and selection methods.
  • Competency 4:Analyze the impact of legal and regulatory issues on staffing management.
    • Articulate possible legal issues associated with screening candidates.
  • Competency 5: Communicate in a manner that is scholarly and professional.
    • Communicate in a professional manner that is appropriate for the intended audience.

Screening and Interviewing External Candidates

In a 13-slide presentation deck, develop a variety of interview questions based on the KSAs and required experience for CapraTek’s regional sales representative positions.

Introduction

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Organizations may have differing plans for hiring outside applicants, but they often follow a common pattern when screening those candidates.

The most common applicant screening process looks something like this:

  • Review of resumes/applications for basic qualifications.
  • A phone interview (generally with HR).
  • A screening interview with HR that may involve some initial testing, reference checking, or background screening.
  • A department interview with more in-depth testing and background checking.
  • Additional interviews with other stakeholders.
  • A decision process.
  • Offer made to selected candidate.

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Preparation

To prepare for this assessment, complete the following:

Scenario

In Assessment 4, you developed a job analysis for CapraTek’s regional sales representative positions. Based on that job analysis, you will interview candidates. Before you can do so, you must develop interview questions based on the required knowledge, skills, and abilities (KSAs) and required experience for the CapraTek position.

Requirements

As a member of CapraTek’s human resources team, you believe the best way to develop the interview plan and select the best candidate is to include a variety of question types. Create a PowerPoint presentation deck containing the following elements, one question per slide. Ensure that your slides are uncrowded, visually appealing, and easy to read.

  • 4 structured interview questions.
  • 3 semi-structured interview questions.
  • 2 behavioral interview questions.
  • 2 situational interview questions.

In addition, include the following:

  • Identify which question types relate to the knowledge, skills, and abilities and required experiences for CapraTek’s position.
  • Explain why the interview questions are appropriate for CapraTek’s position.
  • Explain why interview questions do not request illegal information.

Note: The requirements listed here generally describe proficient performance for each of the required criteria. To earn full points for each criterion, be sure to review the assessment scoring guide for details on what constitutes distinguished performance.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Describe how hiring practices support an organization’s strategy.
    • Identify which question types relate to the KSAs or required experiences for CapraTek’s position.
  • Competency 2: Assess approaches for recruiting, selecting, and retaining talent.
    • Explain why the questions are appropriate for CapraTek’s position.
  • Competency 4: Analyze the impact of legal and regulatory issues on staffing management.
    • Explain why interview questions do not request illegal information.
  • Competency 5: Communicate in a manner that is scholarly and professional.
    • Design slides that are uncrowded, visually appealing, and easy to read.
    • Communicate in a manner that is appropriate for the intended audience.

Recruiting

Create a 10-12 slide presentation that includes your findings about Internet recruiting and a job posting for a sales representative position.

Introduction

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

How organizations begin transitioning from recruiting a large pool of qualified applicants to selecting the best applicant for the position is a complex process that changes over time.

Employment selection decisions are significant for managers and organizations. Poor decisions can result in a tremendous loss for the company. Employee performance is critical to organizational effectiveness because an organization will only be as productive as its workers.

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Preparation

To prepare for this assessment, complete the following:

Scenario

As part of CapraTek’s human resources team, you have been asked to research other employers and their Internet recruiting practices. This assessment has three parts:

  1. Evaluate two employers’ online application processes.
  2. Evaluate two general online job search sites for ease of use and information available.
  3. Develop a job description for the CapraTek regional sales representative posting.

Present your information in the form of a PowerPoint presentation deck of 10–12 slides. Ensure your slides are uncrowded, visually appealing, and easy to read.

Requirements

Part 1: Identify two employers of interest with application portals on their websites. Select only employers that allow online applications. Evaluate the user-friendliness of the application process and the value of the general job information found online. Consider whether the job posting provides candidates with information they would want to know about the organization.

Using information from your research, create a PowerPoint slide presentation with bullet points highlighting your key findings. Include the sites’ links. Add information in the slides’ notes section addressing the following:

  • Articulate the user-friendliness of the online application process for the selected employers.
  • Articulate the user-friendliness of the general job search websites.

Part 2: Select two general job search websites (such as CareerBuilder, Indeed, SimplyHired, Monster). You may choose local or specific job sites. Look at the ease of use and the value of the general information provided on these websites.

Create additional slides for your presentation in which you include the links to the two websites and highlight your findings about them. Add information in the slides’ notes sections that includes the following:

  • Compare the quality of the job information for each employer and website from an applicant’s and employer’s point-of-view.
  • Summarize findings for or against CapraTek using these selected Web sites for posting positions and searching for applicants.

Part 3: Using your job analysis information for CapraTek’s regional sales representatives, develop a job posting for this position. Make location, salary, and working conditions assumptions as needed. Finish the presentation with slides outlining the essentials for the regional sales representative job description as follows:

  • List the necessary qualifications, including educational background, technical experience, skills, and abilities.
  • Describe the physical environment and working conditions.
  • List the most important duties and responsibilities, with percentage of time spent on each, classifying each duty as essential or non-essential.

Note: The requirements listed here generally describe proficient performance for each of the required criteria. To earn full points for each criterion, be sure to review the assessment scoring guide for details on what constitutes distinguished performance.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Describe how hiring practices support an organization’s strategy.
    • Develop a CapraTek job description for use in a job posting.
  • Competency 2: Assess approaches for recruiting, selecting, and retaining talent.
    • Compare the quality of the job information for each employer and website from an applicant’s and employer’s viewpoint.
  • Competency 3: Explore technology tools that support recruiting and staffing management.
    • Articulate the user-friendliness of the online application process for the selected employers.
    • Articulate the user-friendliness of the general job search websites.
    • Summarize findings for or against CapraTek using these selected websites for posting positions and searching for applicants.
  • Competency 5: Communicate in a manner that is scholarly and professional.
    • Design slides that are uncrowded, visually appealing, and easy to read.
    • Communicate in a professional manner that is appropriate for the intended audience.

Conducting a Job Analysis

Write a 3 page memo outlining O*Net findings used to prepare a CapraTek regional sales representative job description.

Introduction

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

The hiring process starts with a job analysis. Individuals tasked with writing job descriptions must include qualifications and requirements that are specific and measurable. They must also identify the unique characteristics and relationships associated with a position.

Job analysis can be seen as the foundation on which the entire staffing process is built. An effective job analysis informs which knowledge, skills, and abilities (KSAs) are needed to effectively perform the job.

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Preparation

To prepare for this assessment, complete the following:

Scenario

Alfred! will be produced in a new manufacturing facility. Groundbreaking on the new facility will begin this summer with full operations to be accomplished in three phases over the next two years. Distribution of the Alfred! device and components will be through existing distributors and retail outlets. While most of the new hires associated with this product line will be at the new manufacturing facility, four regional sales representatives will be hired to support the new product line.

Requirements

You have been asked to develop a job analysis, job specifications, and a job description for the four regional sales representative positions. To develop the initial information for this assessment, use the following U.S. Department of Labor-sponsored website of occupational information containing a database of both standardized and occupation-specific descriptors.

  • U.S. Department of Labor, Employment & Training Administration. (n.d.). O*NET online. http://www.onetonline.org/Hint: Begin your search by clicking Find Occupations. Then, under the Career Cluster heading, go to Marketing, Sales, and Service. From there, you can search for a sales representative in any of the technical fields.

Write a memo to your supervisor outlining your findings, and explain why a job analysis is required for any recruiting and selection process. In addition, address the following:

  • Identify the knowledge, skills, and abilities required for this position.
  • Identify wage information and employment trends for this position in a selected state.
  • Articulate the components of a job description for a position.
  • Explain why a job analysis is a requirement for any recruiting and selecting process; refer to specific uniform guidelines and court rulings.

Note: The requirements listed here generally describe proficient performance for each of the required criteria. To earn full points for each criterion, be sure to review the assessment scoring guide for details on what constitutes distinguished performance.

Additional Requirements

  • Required length is 3–4 pages.
  • Use Times New Roman font, 12 point.
  • Double-space your memo.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Describe how hiring practices support an organization’s strategy.
    • Articulate the components of a job description for a position.
  • Competency 2: Assess approaches for recruiting, selecting, and retaining talent.
    • Identify the knowledge, skills, and abilities required for this position.
  • Competency 3: Explore technology tools that support recruiting and staffing management.
    • Identify wage information and employment trends for this position in a selected state.
  • Competency 4: Analyze the impact of legal and regulatory issues on staffing management.
    • Explain why a job analysis is a requirement for any recruiting and selecting process.
  • Competency 5: Communicate in a manner that is scholarly and professional.
    • Communicate in a professional manner that is appropriate for the intended audience

Examining Adverse Impact

Write a 3-4 page analysis of a selected legal case involving disparate (adverse) impact in selection and hiring.

Introduction

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Many U.S. laws, ordinances, and guidelines directly impact the hiring and selection process. 

Legal compliance is important to protect the individual and the organization. It is crucial for the HRM professional to understand issues surrounding discrimination and how to best avoid pitfalls. This includes awareness not only of disparate treatment but of disparate impact and how to analyze the issue.

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Preparation

To prepare for this assessment, complete the following:

Scenario

The scenario in this assessment will be determined by your choice of case.

Requirements

Using the Cavico and Mujtaba article as a framework with which to view the issue of disparate or adverse impact, analyze your selected case.

  • Provide a description of the case.
    • List the facts.
  • Analyze the important issues in this case:
    • Identify what makes this a case about disparate impact.
    • Identify the dispute.
    • Distinguish the theory of disparate impact from the theory of disparate treatment.
  • Analyze the outcome of the case:
    • Explain the court’s decision.
    • Note whether you agree with the court.
    • Analyze discriminatory impact.
  • Describe how the Uniform Guidelines on Employee Selection Procedures help employers avoid issues related to disparate or adverse impact.

Note: The requirements listed here generally describe proficient performance for each of the required criteria. To earn full points for each criterion, be sure to review the assessment scoring guide for details on what constitutes distinguished performance.

Additional Requirements

  • 3–4 typed, double-spaced pages (not including title page or references).
  • Use Times New Roman font, 12 point.
  • Include a title page and an APA-formatted references page.
  • Ensure that your written communication is free from errors that detract from the overall message.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 2: Assess approaches for recruiting, selecting, and retaining talent.
    • Analyze issues surrounding a case of disparate (or adverse) impact.
  • Competency 4: Analyze the impact of legal and regulatory issues on staffing management.
    • Analyze the outcome of an actual legal case.
    • Describe how the Uniform Guidelines on Employee Selection Procedures help employers avoid issues related to disparate or adverse impact.
  • Competency 5: Communicate in a manner that is scholarly and professional.
    • Communicate in a matter that is scholarly, professional, and consistent with expectations of members of the human resources profession.

Planning an Organization’s Staffing Needs

Write a 2-3 page memo analyzing a U.S. state of your choice as a possible location for a new manufacturing plant.

Introduction

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Multiple demographic changes within the American labor force are impacting employee-employer relationships and cultures within companies. Planning to meet workforce demands requires both a labor market analysis and statistical information.

The following is one way to estimate the number of sales representatives needed next year:

  • If the current number of sales representatives is 300, and the expected sales increase is 15 percent, then 300*.15 = 45 additional sales representatives, or a total of 345 are needed.
  • If you factor in the estimated number of current sales representatives retiring (5 reps) and the estimated voluntary turnover rate (300*.10 = 30 reps), then you can add together 45 + 5 + 30 to estimate 80 total sales representatives.
  • However, if 80 sales representatives go through the training, and 5 percent do not complete it, then an additional 4 sales representatives will need to be hired (80*.05 = 4).
  • The total number of new sales representatives to hire is 84 (80 = 4).

Note: There are several places where you can do your estimations, and by using different assumptions you could produce slightly different results; however, the number of sales representatives to be hired should be very close to this example. Use this approach in this assessment.

Note: Complete the assessments in this course in the order in which they are presented, beginning with Assessment 1.

Preparation

To prepare for this assessment, complete the following:

Scenario

CapraTek, a fictitious technology company, has a long history as a leader in the design and manufacture of computer server components and continues to provide innovative solutions to industry needs. They are currently leveraging this culture of innovation to expand into emerging wireless technologies. As part of that diversification, CapraTek is developing advanced smart-home technology.

Last month, CapraTek announced that it will begin developing a wireless system providing seamless integration of newer home electronics and appliances capable of being controlled electronically. Security, heating and cooling, lights, locks, telephone, home entertainment, computers, and gaming devices all controlled through a single wireless device and a simple Web-based interface—”It’s better than a butler, it’s Alfred!” Alfred! will be produced in a new manufacturing facility currently in the planning phase. Groundbreaking on the new facility is planned within the next six months with full operations to be accomplished in three phases over the next two years. Distribution of the Alfred! device and components will be through existing distributors and retail outlets.

As part of the human resources team, you have been asked to support locating and staffing this new manufacturing facility in order to meet CapraTek’s strategic growth needs. The plan is for Phase 1 to be needed in one year and Phases 2 and 3 at one-year intervals after that. Here is some data you have uncovered when looking at similar CapraTek facilities opened within the past five years:

  • Phase 1 = 140 production employees.
  • Phase 2 = An additional 80 production employees.
  • Phase 3 = An additional 120 production employees.

CapraTek’s facilities management has informed you that the initial training will take place on-site, and staff from other CapraTek locations will conduct the training over approximately a six-week period. Past experiences suggest that only one in five employees interviewed will be both qualified and willing to accept the job, and 20 percent of those hired will not complete the training.

Requirements

Select one of the United States to analyze as a possible location that will support CapraTek’s hiring projections for the new facility. (Normally, this duty is not an HR function.) Using the described CapraTek hiring scenario, write a 2–3 page memo to CapraTek’s VP of operations in which you include the following:

  • Identify the number of production employees to recruit and hire for CapraTek. Note: This is to include the number of applicants needed to meet Phases 1, 2, and 3 as well as the number of hirings needed to meet production of the new product.
  • Describe how employment and demographic trends for a selected state impact CapraTek’s workforce planning.
  • Assess elements of CapraTek’s workplace culture that could be developed for it to become an employer of choice. Include at least three elements, and support your answer from readings and other credible sources.

Note: The requirements listed here generally describe proficient performance for each of the required criteria. To earn full points for each criterion, be sure to review the assessment scoring guide for details on what constitutes distinguished performance.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Describe how hiring practices support an organization’s strategy.
    • Assess elements of CapraTek’s workplace culture that could be developed such that it becomes an employer of choice.
  • Competency 2: Assess approaches for recruiting, selecting, and retaining talent.
    • Identify the number of production employees to recruit and hire for CapraTek.
    • Describe how employment and demographic trends for a selected state impact CapraTek’s workforce planning.
  • Competency 5: Communicate in a manner that is scholarly and professional.
    • Communicate in a professional manner that is appropriate for the intended audience.

Biopsychology: Behaviour and Drugs

Describe the role of neurotransmitters in the brain and explain how neurotransmitters affect behaviour such as aggression or mood.

Word count guideline: 150 words

Explain how excitatory and inhibitory neurotransmitters affect neurons in the brain.

Word count guideline: 150 words

Explain the effects of acetylcholine on cognition (thinking), behaviour, or emotion.

Word count guideline: 100 words

Explain the role of GABA on cognition (thinking), behaviour, or emotion.

Word count guideline: 100 words

Explain how the following types of drug affect neurotransmitter activity (300 words)

a)      Antagonist

b)      Agonist

c)      Reuptake inhibitor

Word count guideline: 300 words

Choose 3 psychoactive drugs, explain how each of them affects neurotransmitter activity, and explain their effects on cognition (mental processes) and behaviour.

a)      Drug 1

b)      Drug 2

c)      Drug 3

Word count guideline: 300 words

Describe the mechanism by which Serotonin Antagonist and Reuptake Inhibitors produce their therapeutic effects.

Word count guideline: 200 words

Discuss the effectiveness and appropriateness of using Serotonin Antagonist and Reuptake Inhibitors (SARIs) in the treatment of mood and anxiety disorders.

Word count guideline: 400 words

 

 

Company Financial Ratio Analysis Solved

Company Financial Ratio Analysis Solved

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Examples of Financial ratios:

In an excel sheet, using the attached financial statements calculate the following ratios for both companies. In the body of text for each area of comparison, using the calculated the ratio, indicate which company is in a stronger position, and briefly explain your rationale.

Liquidity Ratios:

current ratio = total current assets / total current liabilities

quick ratio = (total current assets − inventories) / current liabilities

net working capital = current assets − current liabilities

Activity Ratios:

total asset turnover ratio = revenues / total assets

Financial Leverage Ratios

total asset turnover ratio = revenues / total assets

debt–equity ratio = total debt / total shareholders’ equity

Probability Ratios:

net profit margin = net income / sales or revenues

gross profit margin = earnings before interest and taxes / sales or revenues

return on assets = net income / total assets

return on equity = net income / stockholders’ equity

Praeda Inc. has the choice of buying a piece of equipment or leasing it

Praeda Inc. has the choice of buying a piece of equipment or leasing it.  The purchase cost of the equipment will be $155,000.  For tax purposes, the depreciation on the machine will be full, straight-line depreciation over 7 years.  The machine will be used for 5 years, regardless of whether it is purchased or leased.  The machine is expected to have a market value of $70,250 at the end of the 5 years.  The lessor will require annual payments of $21,000.  A total of 5 annual payments will be required under the lease contract, with the first payment due immediately (that is, at the start of the first year).  The lease will be treated as an operating lease for tax and reporting purposes.

Praeda Inc. pays 6.25% interest on its loans, and its weighted average cost of capital is 8.75%.  The company faces a marginal tax rate of 21%.

  1. What is the cost of leasing?
  2. What is the cost of borrowing?
  3. Should Praeda Inc. lease the machine, or should it buy the machine? You must explain your answer in order to get any credit.