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Deep Mining, Inc., is contemplating the acquisition of some new equipment for controlling coal dust that costs $174,000. The firm uses MACRS depreciation which allows for 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent depreciation over years 1 to 4, respectively. After that time, the equipment will he worthless. The equipment can be leased for $54,400 a year for 4 years. The firm can borrow money at 11.5 percent and has a 36 percent tax rate. What is the net advantage to leasing?
Using the initial simulation results, determine the estimated total annual inventory cost using the cost parameters provided in the example. Break out between order cost, holding cost, and stockout cost.
Compute the net advantage to leasing.- In general, what effect would the use of accelerated depreciation, such as MACRS, have on the answer to part a?
As a general rule, the capital structure that maximizes firm value, or stock price also maximizes the expected rate of return on equity (ROE), maximizes the weighted average cost of capital (WACC)
Consider a firm with an EBIT of $567,000. The firm finances its assets with $1,170,000 debt (costing 6.1 percent) and 217,000 shares of stock selling at $13.00 per share. The firm is considering increasing its debt by $900,000, using the proceeds to ..
Identify ALL insurance coverage’s you will need to bind for the business. Be specific about the details of any aviation related coverage’s. Business grows and soon you find it hard to maintain the increasing pace. You need to hire a part time pilot t..
Yan Yan Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.4 percent paid semiannually and 18 years to maturity. The yield to maturity on this bond is 4.7 percent. What is the price of the bond?
A bond for Firebird, Inc. has a coupon rate of 7% and face value of K1000, 000. The yield to maturity is 6.8%. The bond has a remaining life of 30 years and makes annual coupon payments? What is this bond's current market value?
Inflation, recession, and high interest rates are economic events that are best characterized as being
Aquitaine Corporation has borrowed $1.35 million from a bank with the understanding that it will pay $60,000 a month, until the loan is paid off. The bank will charge 6% per annum interest on the unpaid balance, calculated monthly. How long will it t..
A bank sells a “three against six” $3,000,000 forward rate agreement (FRA) for a three- month period beginning three months from today. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a three..
Lycan, Inc., has 8.8 percent coupon bonds on the market that have 7 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 10.8 percent, what is the current bond price?
Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2.00, a dividend in year 2 of $2.80, and a dividend in year 3 of $3.20. After year 3, dividends are expected to grow at the rate of 6% per year. An appropriate required return f..
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