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A construction company is considering whether to lease or buy equipment for its new 4-year project. If they buy the equipment, it will have an initial investment cost of $600,000 with annual costs of $40,000. At the end of the 4 years the equipment can be sold for an estimated $360,000. For tax purposes, the company will use MACRS-ADS depreciation on the equipment. If they decide to lease, it will cost them $220,000 per year all inclusive.? However, they will also be required to make a $150,000 initial deposit that will be refunded in full at the end of the 4-year lease.
The refund is not taxable. The company's marginal effective tax rate is 30% and the capital gain tax rate is 15%. The after-tax MARR is 17% per year. Based on the after-tax cash flows, what would you recommend, leasing or purchase?
Why would the IMF have been bailing out South Korea, Indonesia, and Thailand in 1997? What was the purpose of the bailouts?
Sensor international sells 300,000 packages in its first year and 400,000 in its second. If the investor's original investment was $100,000, determine the return on investment in year 1 and year 2 for the firm. Assume a tax rate of 20 percent.
In his Pecking Order Theory, Stewart Myers argues that managers should consider cost of obtaining various types of external financing in capital structure
Dividends have been growing at a compound annual rate of 6% and are expected to continue growing at that rate forever.
You own a security that provides an annual dividend of $135 forever. The security’s annual return is 5%. What is the present value of this security? Round your answer to the nearest cent.
Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest..
Discuss how decreasing the interest rate effects the principle amount based on the same interest payments of a simple interest loan?
A sneaker outlet has made the purchase of new running shoes: 12 pairs @$45, 18 pairs @ $40, and 20 pairs @ $50. Calculate the cost of this inventory by FIFO.
Lakonishok Equipment has an investment opportunity in Europe. The project costs €19 million and is expected to produce cash flows of €3.6 million in Year 1, €4.1 million in Year 2, and €5.1 million in Year 3.
There is a 36.59% probability of an average economy and a 63.41% probability of above average economy. What is the expected return for this two stock portfolio?
What is the weighted average cost of capital of the company? How has the company’s stock been performing in the last 5 years?
Joan faces an 80% chance of having a loss of $0 and a 20% chance of having a loss of $10. Mary also faces an 80% chance of having a loss of $0 and a 20% chance of having a loss of $10. Harry faces a 80% chance of having a loss of $0 and a 20% chance ..
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