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Smith Corporation is considering the lease of an automated production line costing $500,000 from Ace Leasing. The period of the lease will be 4 years. The welder will be depreciated under MACRS rules for a 3-year class asset. Smith's marginal tax rate is 30%. Annual lease payments will be $190,000. Estimated salvage value is zero. Q1. If Ace's after-tax cost of borrowing is 16%, compute the after tax cost of leasing. Smith could also purchase the electronic welder for $500,000. The firm would finance the purchase of the machine with a 16%, 4-year loan requiring end -of-year installment payments of $178,690. It would be depreciated under MACRS using a 5-year recovery period. The firm would pay $5,000 per year for a service contract that covers all maintenance costs. There is no salvage value. Q2. Compute the after-tax cost of purchasing.
Two securities, Security A and Security B, with standard deviation of 30% and 40 percent, respectively. Compute the standard deviation of a portfolio weighted equally between two securitites if their correlation is;
Find out the present value of following stream of cash flows supposing that the firm's cost is 14% and that these amounts are received at the end of each year.
Find out the future value three years hence of $1000 invested in an account with a stated annual interst rate of 8%:
One year from today, investors anticipate that stock will pay a dividend of 3.25 per share
In a mutual fund 401(k)that you have through work, you notice that for every dollar you invest, your firm also invests a dollar. You are able to invest up to 5 percent of your yearly income,
Determine social efficient level of provision for snowploughing services. Write down 3 possible methods in which they can share costs of snow ploughing at social efficient level and how much would each person pay under these 3 methods?
I have just been hired through the new president of Playword Greeting Cards, an established company that sells greeting cards and collectibles to its own line of company-owned and franchise stores.
Determine how might debt equity swaps help to solve the international debt problem? Point out the advantages and disadvantages from the viewpoint of the debtor country.
Here are stock market and Treasury bill returns between 2000 and 2004: Calculate the risk premium on common stock in each year?
If the bond had 17 years to maturity when you originally purchased it, what was your total return for the past year
what is the current value of the stock? A) $100 B) $105 C) $110 D) $120 I know the answer is B) $105 but can you please show me the full formula for P and how to fit the numbers in to come up with this answer?
At year end 2004, jordan company's balance sheet showed current assets = $800, fixed assets =$1500, intangible assets =$300, current liabilities =$600, and long term liabilities =$1400. What is the value of the shareholder's equity account?
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