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ABC Co needs to acquire equipment at a cost of $2,500,000 {includes set up costs of $225,000 deemed to be capitalized} belonging to Class 8 (CCA Rate 20%). The company's financial institution has offered a borrowing rate (cost of borrowing) of Prime + 2% and the co`s tax rate is 35%. The company can lease the equipment for $825,000 a year for four years where lease payments occur at the beginning of the contract. The equipment has no salvage value and Prime is assumed to remain static at 6% over the life of the lease. The production manager's salary for this project is $65,000. Using the NAL approach, what advices would you provide as to the option the company should pursue?
An HMO requests your hospital services for its obstetrics division. It offers to pay your hospital $2,000 for a vaginal delivery without complications (DRG 373).
Australian Standard for lighting to firstly ensure compliance with the standard and compatibility with current fixtures (T8 linear fluorescent);
a) 12% nominal rate, semiannual compounding, discounted back 5 years b. 12% nominal rate, quarterly compounding, discounted back 5 years
Crypton Electronics has a capital structure consisting of 44% common stock and 56% debt. A debt issue of $1000 par value, 5.6% bonds that mature in 15 years and pay annual interest will sell for $979.
If you deposit $5,200 at the end of each of the next 25 years into an account paying 10.30 percent interest, how much money will you have in the account in 25 years
the real risk-free rate is 2.75%, inflation is expected to be 1.5% this year and 3.75% during the next 2 years. assume that the maturity risk premium is zero. what is the yield on 2-year treasury secutities
A company is 46% financed by risk free debt. The interest rate is 11%, the expected market risk premium is 9%, and the beta of the company's common stock is 0.56.
The target capital structure for JM is 53% common stock, 16% preferred stock, and 31% debt. If the cost of common equity for the firm is 19.1, the cost of preferred stock is 12.8%, and the before-tax cost of debt is 10.2%,
Inflation is expected to remain constant in the future at 3.3%. Default-risk premium is expected to remain constant at the rate of 1.8% . The liquidity risk is only 0.03% on the bonds.
Write a speech that you would give to a friend in an elevator summing up the contents of this course. You have 30 to 90 seconds to inform your friend of the most important elements.
If the returns required by investors are 10 percent, 13 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capital's after-tax WACC. Assume that the firm's marginal tax rate is 40 percent.
A 5.5% coupon municipal bond has 16 years left to maturity and has a price quote of 92.55. The bond can be called in 9 years. The call premium is one year of coupon payments.
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