Evaluate the value of leased assets

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Reference no: EM13215500

1. Casher Industries leases a significant portion of its assets, expecting $25 million in rental expense next year. Casher Industries can borrow at 7 percent and the average life of a leased assets is seven years. Estimate the value of leased assets. If you misestimate the average life to be 10 years, how large will the valuation error be?

2. Casher Industries expects to earn $25 million in operating profit next year. The company pays an operating tax rate of 30 percent and a marginal tax rate of 35 percent. Using the lease data provided in question 1, what is the after-tax operating profit adjusted for capitalized operating leases?

Reference no: EM13215500

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