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Kohers Inc. is considering a leasing arrangement to finance some manufacturing tools that it needs for the next 3 years. The tools will be obsolete and worthless after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life. It can borrow $4,800,000, the purchase price, at 10% and buy the tools, or it can make 3 equal end-of-year lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year. The firm's tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases. What is the net advantage to leasing (NAL), in thousands?
Zoso is a rental car company that is trying to determine whether to add 28 cars to its fleet. The company fully depreciates all its rental cars over five years using the straight-line method.
Payout and retention ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders.
What would be the market value of Trident Corporation if it were unlevered and what would be the expected return on equity if Trident were an all-equity firm?
An investment will pay $150 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $600 at the end of Year 6.
Galveston shipyards is considering the replacement of an eight year old riveting machine with a new one that will increase earnings before depreciation and taxes from $27,000 to $54,000 per year.
You buy a(n) 5.6% coupon, 8-year maturity bond for $949. A year later, the bond price is $1,064. Assume coupons are paid once a year and the face value is $1,000.
You expect to receive $38,000 at graduation in two years. You plan on investing it at 9.75 percent until you have $173,000. How long will you wait from now?
Your annual savings of $12,225 are deposited into Account # 3, which earns you 8.39% compounded quarterly for 5 years. How much will you have in Account #3 10 years from now
Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 10.5 percent. If your goal is to create a portfolio with an expected return of 12.53 percent,
The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth
You were asked to estimate the cost of equity based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference
Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,102,895.
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