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Joshua Trucking has chosen a new software package tied to satellite global positioning system (GPS), in order to monitor its fleet. The software will be outdated after three years and replaced. The software vendor has given Joshua Trucking the choice of buying the software for $65,000 or leasing it for an annual payment of $25,000. To attract customers, the GPS vendor allows lease payments at year-end. The firm has decided to purchase the vendor’s service contract under either option. Assume that depreciation is on a straight-line basis, Joshua Trucking’s cost of obtaining funds is nine percent, and the firm is in the 34 percent tax bracket. Should it borrow and buy or lease the GPS software? Show calculations.
National Home Rentals has a beta of 1.24, a stock price of $22, and recently paid an annual dividend of $.94 a share. The dividend growth rate is 4.5 percent. The market has a
Portfolio Required Return Suppose you manage a $4.11 million fund that consists of four stocks with the following investments: Stock Investment Beta A $200,000 1.50 B 750,000
Sports Corp has 10.1 million shares of common stock outstanding, 5.1 million shares of preferred stock outstanding, and 1.1 million bonds. If the common shares are selling for
Each business day, on average, a company writes checks totaling $41,500 to pay its suppliers. The usual clearing time for the checks is six days. Meanwhile, the company is rec
Both bond A and bond B have 8.2 percent coupons and are priced at par value. Bond A has 6 years to maturity, while bond B has 18 years to maturity. a. If interest rates sudden
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he Los Angeles Lakers are sold for 650 Million. At a tax rate of 25% what is the new owner's yearly tax savings if he uses straight line depreciation of the purchase price ove
You have decided to enter the candy business. You are considering producing two types of candies: Slugger candy and Easy Out candy, both of which consist solely of sugar, nuts
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