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PepsiCo is planning to acquire a fleet of trucks to support its new Pepsi Express distribution system in the Omaha area. The installed cost of the trucks is $777,000. The salvage value at the end of five years is expected to be $75,000 after-tax. The present value of the expected salvage is $42,600, after discounting at PepsiCo's cost of capital. The present value (using PepsiCo's after-tax cost of debt as the discount rate) of the depreciation tax shield from this project is $210,000. The present value of the after-tax lease payments (also using PepsiCo's after tax cost of debt as the discount rate) is $575,000. PepsiCo will incur (in present value terms) operating costs of $140,000 more, after-tax, if the trucks are owned than if they are leased.
What is the net advantage of leasing in this case? What should PepsiCo do?
Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $28 million. Management has decided to save $1.4 million a quarter for this purpose. The firm earns 6 percent compounded q..
You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75) has a beta of 0.9. The risk-free rate is 5.4%, and the market risk premium is 5.0%. Assuming the market..
CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. It is expected that the range of candies ..
A stock is trading at $65 per share. The stock is expected to have a year-end dividend of $5 per share (D1 = $5), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 11% (assume the market is in ..
Stallman Company took a physical inventory on December 31 and determined that goods costing $220,490 were on hand. Not included in the physical count were $29,100 of goods purchased from Pelzer Corporation, f.o.b. shipping point, and $26,200 of goods..
Linda is a doctor that has worked for a well-respected clinic for the last two years. The clinic is a professional service corporation operated as a C corporation. She has now been offered an equal ownership interest in the C Corporation and a limite..
Write a DETAILED analysis and comparison of the income statement items and differences between the two. Be sure to explain why the common-size statement is helpful in this analysis.
Describe the major trends that asset management ratios exhibit, and provide an opinion on what this means to the company. Describe how this company is doing relative to its industry (compare your company’s ratios to the industry’s ratios). This is fo..
You are given the following information concerning Parrot head Enterprises: Debt: 9,700 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 105.75. These bonds pay interest semiannually. Preferred stock: 8,700 shares..
Money has a time value associated with it. A dollar received today is worth more than a dollar received in the future. What role does inflation play when determining the value of a dollar? Explain.
A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a targ..
Final Project for Financial and Performance Management, you will prepare and submit a consultancy report to the management of Anthony's Orchard
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