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Smith Corporation is considering the lease of an automated production line costing $500,000 from Ace Leasing. The period of the lease will be 4 years. The welder will be depreciated under MACRS rules for a 3-year class asset. Smith's marginal tax rate is 30%. Annual lease payments will be $190,000. Estimated salvage value is zero. Q1. If Ace's after-tax cost of borrowing is 16%, compute the after tax cost of leasing. Smith could also purchase the electronic welder for $500,000. The firm would finance the purchase of the machine with a 16%, 4-year loan requiring end -of-year installment payments of $178,690. It would be depreciated under MACRS using a 5-year recovery period. The firm would pay $5,000 per year for a service contract that covers all maintenance costs. There is no salvage value. Q2. Compute the after-tax cost of purchasing.
An individual has a $120,000 30 year mortgage at 6 percent fixed. This individual also has a floating rate Home Equity line of credit for $20,000. The current rate on this loan is 8.5 percent
Analyze Mark's budget as a financial planning tool for making decisions in the following situations. In each case, how will other financial planning tools affect Mark's decisions?
By how much does the required return on the riskier stock exceed the required return on the riskier stock exceed that on the less risky stock? Round your answer to two decimal places.
Computation of yield on Treasury bond with given data and The market expects that inflation will be 3 percent each year for the next 5 years
Louis Nicosia operates four 7 to 11 stores. He has just received the monthly bank statement at October 31 from City National Bank, and the statement shows an ending balance of $3,840.
Suppose you recently graduated from college, and your job search led you to S&S Air. Because you felt the corporation's business was taking off, you accepted a job offer.
Cisco Systems has total assets of $4.439 billion, total debt of $2.667 billion, and net sales of $1.721 billion. Its net profit margin for the year is 20 percent, while the operating profit margin is 22 percent. What are Cisco's net income, EBIT R..
What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
A stock just paid a dividend of $1.2. The required rate of return is 11.5%, and the constant growth rate is 3.6%. What is the current stock price.
What is the amount of the lump sum that would be exactly equal to the present value of the annual installments? Round off to to the nearest $1 and show formula to how you get the answer.
Computation of the current price of the bond and What is the value of the same bond if the interest is paid semi-annually
Computation par value of bonds and What is the bond's annual coupon interest rate
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