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Green Valley Farms is considering either leasing or buying some new farm equipment. The lessor will charge $21,000 a year lease. The purchase price is $59,000. The equipment has a 3-year life after which time it will be worthless. Green Valley Farms uses straight-line depreciation, has a 32 percent tax rate, borrows money at 8 percent, and has sufficient tax loss carryovers to offset any potential taxable income the firm might have over the next five years. What is the net advantage to leasing?
Would you approve the loan application. Elucidate how you came to this conclusion.
The Allegheny Valley Power Company common stock has a beta of 0.80. If the current risk-free rate is 6.5% and the expected return on the stock market as a whole is 16%, determine the cost of equity capital for the firm (using the CAPM).
Why do mergers and acquisitions often lead to consolidation of positions or reductions in workforce? What effect do these changes have on the employees?
If the tax rate is 35 percent and the discount rate is 7 percent, what is the NPV of this project?
If $2 million in bad loans were removed from the bank's assests, show how the equity capital ratio would change.
Texas Corporation stock pays a dividend on every July 15. In 2008: the dividend is $3.00, in 2009 $3.25, in 2010 $3.50, and in 2011 and all the subsequent years it will be $4.00.
You have just won$140,000 from a lottery. If you invest all this amount in a tax-free money market fund earning8% compounded weekly, how long do you have to wait to become a millionaire? (Round your answer to two decimal places.)
Suppose two securities, A and B, with standard deviations of 30 percent and 40 percent, respectively. Determine the standard deviation of a portfolio weighted equally between two securities,
It negotiates a 1-month forward contract at the beginning of every month to hedge its payables. Assume the British pound appreciates consistently over the next 5 years. Will Sanibel be affected? Explain.
Computation of initial cash outflow and what is the minimum price at which you should offer to supply the jets
On January 1, 2009, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 7.0%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest ta..
Explain how internal selection decisions differ from external selection decisions. Write down the differences among peer ratings, peer nominations, and peer rankings. Should they be used? and how this can be employed in an organization.
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