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As a financial analyst for Muffin Construction, you have been asked to recommend the method of financing the acquisition of new equipment needed by the firm. The equipment has a useful life of eight years. If purchased, the equipment, which costs $700,000, will be depreciated under MACRS rules for 7-year class assets. If purchased, the needed funds can be borrowed at a 10 percent pretax annual rate. Muffin's weighted after-tax rate of capital is 12 percent. The actual salvage value at the end of eight years is expected to be $50,000. Muffin's marginal ordinary tax rate is 40 percent. Annual, beginning-of-year lease payments would be $160,000.
a. Compute the net advantage to leasing.
b. Should Muffin lease or own the equipment?
whatrsquos the best way for a company to grow? suppose a company would like to move from a regional company to a
You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all equity firm. The other shareholders have agreed to have the firm borrow $1.5 million to purchase your 1,000 shares of stock.
abc electronics is considering an investment that will have cash flows of 16000 5000 and 4000 for years 1 through 3.
lamar lumber buys 8 million of materials net of discounts on terms of 35 net 60 and it currently pays after 5 days and
1 In the steps a company takes to prepare for an IPO, the "road show" precedes the "bake-off". 2 The only reason why the price would fall on a corporate bond is if market interest rates increase.
Question 1: Projection of expenses can begin after completing _________ assumptions.
Beaksley, Inc. is a very cyclical type of business which is reflected in their dividend policy. The firm pays a $2.00 a share dividend every other year. The last dividend was paid last year. Five years from now, the company is repurchasing all o..
Excess short term borrowing (if any exists)Fielding has no short term borrowing as of March 1st, 2008. assume that the interest on short term borrowing is 1% per month. What is fielding 's projected total receipts (collections) for april?
Two Years ago, Stephanie Johnason, from Berkeley, California invested $1000 by buying 125 ($8 per share NAV) in the Can't Lose Mutual Fun, an aggressive growth no-load mutual fund. Last year, she made two additional investments of $500 each (50 shar..
Assume that the stock price St follows a log-normal distribution, meaning ln St is normal random variable. If the variance of ln St is σ 2 t , then use the no arbitrage condition on St to determine the mean of ln St.
Whichever system is chosen, it will not be replaced when it wears out. If the tax rate is 34 percent adn the discount rate is 11 percent, which system should the firm choose?
a project has sales of 462000 costs of 274000 depreciation of 26000 interest expense of 3400 and a tax rate of 35
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