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Suppose Procter and Gamble? (P&G) is considering purchasing $18 million in new manufacturing equipment. If it purchases the? equipment, it will depreciate it on a? straight-line basis over the five? years, after which the equipment will be worthless. It will also be responsible for maintenance expenses of $1.50 million per year.? Alternatively, it can lease the equipment for $4.2 million per year for the five? years, in which case the lessor will provide necessary maintenance. Assume? P&G?s tax rate is 30% and its borrowing cost is 7.5%.
a. What is the NPV associated with leasing the equipment versus financing it with the lease equivalent? loan?
b. What is the? break-even lease rate long dash—that ?is, what lease amount could? P&G pay each year and be indifferent between leasing and financing a? purchase?
If the spot rate for the Won is 800 won equals 1 US $, and the annual interest rate on fixed rate one-year deposits of won is 9% and for US$ is 3%, what is the one-year forward rate for one won in terms of dollars? Is this an indirect or a direct rat..
Barrett Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Barrett does not pay any dividends, and it has no plans to pay dividends in the near future. What is an estimate of Bar..
Hazel owns an event planning company that specializes in very high-end events. Several years ago, Hazel purchased a magnificent chocolate fountain for $3,000 and has since taken $1,200 in depreciation deductions on the fountain. Which of the followin..
In its most recent financial statements, Newhouse Inc. reported $30 million of net income and $510 million of retained earnings.
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Find its break-even point (in units) in terms of L, M, X and Y.
Avista Utility paid out $1.37 dividend per share last year. What’s the estimated stock value using the DDM model?
Calculate Cleopatra's weighted average cost of capital that is appropriate to use in evaluating this capital budgeting project.
What is the dollar price of the? bond? What is the ?bond's current yield??
How many directors can he elect with cumulative voting?
The Lanoi Company has EBIT of $30,000 and market value debt of $150,000 outstanding with an 8% coupon rate. The cost of equity for an all equity firm would be 12%. Aggie has a 30% corporate tax rate. Investors face a 20% tax rate on debt receipts and..
Image Storage Corporation has 1,000,000 shares outstanding. It wishes to issue 500,000 new shares using a (North American) rights issue. If the current stock price is $50 and the subscription price is $47/share, the value of a right is calculated exp..
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