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The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.8 million in annual pretax cost savings. The system costs $9.8 million and will be depreciated straight-line to zero over its five-year life, after which it will be worthless. Wildcat’s tax rate is 34 percent, and the firm can borrow at 9 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2,050,000 per year. Lambert’s policy is to require its lessees to make payments at the start of the year. Suppose Lambert requires Wildcat to pay a $700,000 security deposit at the inception of the lease.
Calculate the NAL with the security deposit.
What should be the beta of the equity after the firm changed its capital structure?
Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt–equity ratio of .67. It’s considering building a new $65.7 million manufacturing facility. Increased use of accounts payable financi..
Skyumeal Inc. is considering a project that has the following cash flow data. What is the project's discounted payback if the required rate of return for the project is 10 percent? Should the company accept or reject the project if the required disco..
What negative impact did Martin Shkreli's practice of reverse mergers and purchasing of medicines already on the market, only to sell them at higher prices have?
You hold a stock portfolio worth $15 million with a beta of 1.05. You would like to lower the beta to 0.90 using S&P 500 futures, which have a price of 460.20 and a multiplier of 250. What transaction should you do?
What are the key differences between the simple deposit multiplier and the money multiplier?- explain whether the money multiplier will increase or decrease.
A five-year project has an initial fixed asset investment of $350,000, an initial NWC investment of $38,000, and an annual OCF of −$37,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
How does Plato's conception of an ideal government differ from that of Aristotle's? Why do you think Plato, and philosophers in general, find the concept of a perfect society, or utopia, so useful?
You walk into a new job and find that there are hundreds of accounts payable checks sitting in drawers.
Compute the future value of a $100, 3-year ordinary annuity compounded at 5%? What is the future value of a 5-year ordinary annuity with annual payments of $200, evaluated at a 15 percent interest rate? What is the present value of an annuity that wi..
how many customers each day, on average, are needed to make the system profitable for Cow Chips?
A company's CFO wants to maintain a target debt-to-equity ratio of 1/4. If the WACC is 18.6%, and the pretax cost of debt is 9.4%, what is the cost of common equity assuming a tax rate of 34%? A. 19.90% B. 20.90% C. 21.70% D. 22.73%
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