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Air Charter Limited has been asked by GoldDiggers Limited to provide an Air Shuttle service to the gold exploration site. AirCharter will have a one year contract with the Gold Diggers with the possibility of renewal for another 4 years. AirCharter has the following choices: Buy the helicopter for $500,000, or Arrange a 5 year non cancellable lease, for $100,000 per year, paid at the beginning of each year. Assume that the CCA rate for the helicopter is 25%, and CCA will be claimed at the end of each year. The corporate tax rate is 35%. The weighted average cost of capital is 14% and Air Charter can borrow at 9%. If Air Charter purchases the helicopter, before tax operating cost will be $100,000 per year, payable at the beginning of each year. Helicopter will be worth $300,000 after 5 years. There is 20% chance that after one year contract will not be renewed. In that case helicopter will be sold at a short notice for $400,000. Assume asset pool will remain open. If AirCharter leases the helicopter, and contract is not renewed after one year, then AirCharter has to pay a penalty of $100,000 to break the lease. Before tax operating cost will be $80,000 per Should AirCharter lease or purchase the helicopter?
Discuss and explain the difficulties involved in having a standardized price for a company's products across all countries.
What would the value of the Fulton bonds at an 8% required interest rate of return if the interest were paid and compounded semiannually?
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Dunning Chemical paid a dividend at the end of year one of $1.30, the anticipated growth rate was 10 percent, and the required rate of return was 14 percent.
Compute the required rate of return on FBC stock.
Determination of current stock price also capital gains and The constant growth model cannot be used because the growth rate is negative
An Allied Northern preferred stock pays a $3.84 annual dividend. What is the value of the stock to an investor who requires a 9.5% return?
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You've been asked by the local college to write down a lecture that explains the gold standard and addresses the functions of the world's major foreign exchange markets. Write down a summary detailing the functions of world's major foreign currenc..
What is the additional profit associated with running larger batch sizes through the powder-coating process?
Solar Corporation earned a 4% profit margin on sales of $30 billion, turned over its assets 6 times, had a current ratio of 3.4, an EPS of $4.25, and a return on equity of 15%. Calculate Solar's return on assets. Analyze your results.
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