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Question: Delmont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life, so the interest expense for taxes would decline over time. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time, it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment at the beginning of each year (i.e. 4 payments total). DTC's tax rate is 40%.
What is the net advantage to leasing?
Assume the current U.S. dollar-yen spot rate is 90 ¥/$. Further, the current nominal 180-day rate of return in Japan is 1% and 2% in the United States.
All is not lost: You just received an offer in the mail to transfer your $12,000 balance from your current credit card, which charges an annual rate of 19.8 percent, to a new credit card charging a rate of 10.4 percent.
Discuss these arguments and explain the fallacy in them
(a) What is the PV of all future cash flows if it is assumed that the gold mine is never closed?
Suppose that you wanted to invest in something and you did not want it to pay any regular income (you want to make all your return when you sell it).
If the firm issues 10,000 shares of preferred stock at $50 per share, how much of the total value of the issue will the firm be able to use (receive)?
First, you need to decide on your budget, which is the maximum you can spend on a car, and that maximum number should take into consideration price, tax, registration, and fixing if needed. Second, go to a website such as cars.com, and search for ..
if the required return declines to 9% and the dividend remains $1, what is the value of the stock? if the stock is selling foor $20, what does that imply?
Compute the EBIT-EPS indifference point between the equity and debt financing alternatives.
Which one of the following will increase net working capital? Assume the current ratio is greater than 1.0.
A project costs $10,000 and is expected to return after tax cash flows of $3,000 every year for next ten years. Determine the project's payment period.
A company purchase a piece of manufacturing equipment for an additional income. The expected income is $3, 500 per semester. Its useful life is 9 years.
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