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1. The following are sensible reasons for leasing:
I) Short-term leases are convenient.
II) Standardization leads to low administrative and transaction costs for the lessor.
III) Lease cancellation options are valuable.
IV) Tax shields can be used.
2. The L Company is considering a new office computer system. They can purchase the system for $15,000. If the computer system is purchased, it will be depreciated straight line over a five year life to a zero salvage value. However, they estimate that it could be sold for $4,000 at that time. Alternatively, L Company could lease the computer system for six payments of $2,800, with the first payment due immediately. L Company's before tax cost of debt is 9% and its marginal tax rate is 34%. The cost of leasing minus the cost of purchasing is:
-$132
$926
$1,249
-$311
For the second part of the course project, you will perform a critical evaluation and comparison of two publicly-traded companies in the same health care segment. Your answer should apply the financial concepts and practices covered in this course to..
Suppose you own a well diversified stock portfolio currently worth 10 million. The portfolio has a beta of 0.8. Assume the S&P 500 futures price is 1,200. Describe in detail the futures transaction you would undertake to hedge the value of your portf..
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It is May 1, and the quoted price of a bond with an Actual/365 day count and 8% per annum coupon in the United States is 104. It has a face value of 100 and pays coupons on April 1 and October 1. What is the cash price rounded to the nearest whole nu..
Krista’s sells $4,000 worth of goods in December, $2,800 worth in January, $3,200 in February and $3,500 in March. The wholesale cost is 65 percent of the retail price. The firm has a receivables period of 30 days, a payables period of 60 days, and b..
Provide recommendation and forecast future financial states. Analyze financial standpoint, and future cost saving opportunities.
You take out a 30-year $160,000 mortgage loan with an APR of 6% and monthly payments. In 10 years you decide to sell your house and pay off the mortgage. What is the principal balance on the loan?
In a waiting line situation, arrivals occur around the clock at a rate of six per day, and the service occurs at one every three hours. Assume the Poisson and exponential distributions. Find average time in the waiting line.
Adele Corp's sales last year were $315,000, and its year-end total assets were $355,000. The average firm in the industry has a total assets turnover ratio (TATO) of 2.4. The firm's new CFO believes the firms has excess assets that can be sold so as ..
Suppose there are 8 different management training positions to be assigned to 8 employees in the company's junior management training program. In how many different ways can the 8 individuals be assigned the 8 different positions?
Assume you invest $5,300 at the end of each year into an equity fund. The fund is expected to pay 11.4% percent interest annually. How much money will you have in the fund in 20 years?
What is the difference between the expected rate of return and the required rate of return? What does it mean if they are different for a particular asset at a particular point in time?
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