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You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $7,100,000 and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $2,352,000 per year for four years. Assume a 35 percent tax bracket. You can borrow at 13 percent before taxes. What is the NAL of the lease from the lessor's viewpoint? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). Calculate the project’s Time 0 cash flow, taking into account a..
Assume there are no taxes or imperfections. Given this assumption, which one of the following statements is correct? A cash dividend has no effect on the market price of the payer's stock. A cash dividend decreases shareholder wealth. Stock repurchas..
Commonwealth Construction (CC) needs $3 million of assets to get started, and it expects to have a basic earning power ratio of 35%. CC will own no securities, so all of its income will be operating income. what is the difference between CC's expecte..
A company wants to raise money in the capital markets. The firm intends to sell $18 million of common stock; the expected return is 15%
Consider two mutually exclusive projects with the following cash flows: Project S is a 4 year project with initial (time 0) cash outflow of 3000 and time 1 through 4 cash inflows of 1500, 1200, 800 and 300 respectively. Project L is a 4 year project ..
Goodbye, Inc., recently issued new securities to finance a new TV show. The project cost $13.3 million, and the company paid $655,000 in flotation costs. If the company issued new securities in the same proportion as its target capital structure, wha..
The “implied” exchange rate between USD and Japan based on “Big MacCurrency” is
Calculate the cost of each capital component, after-tax cost of debt, cost of preferred, and cost of equity with the CAPM method.
A chain of appliance stores, APP Corporation, purchases inventory with a net price of $700,000 each day. The company purchases the inventory under the credit terms of 1/15, net 35. APP always takes the discount, but takes the full 15 days to pay its ..
What is the price of a 6% coupon bond with 30 years left to maturity and a market interest rate of of 8.25%? is this discount or a premium bond? (hint: interest payments are semi-annual and fair value is $1000) please draw a time line and use a finan..
Franchising is a win-win combination; both franchisees and franchisors are guaranteed success. The main reasons small businesses fail are poor management skills on the part of owners, inadequate capital, and poor planning.
Martin & Sons has $4.2 million in net working capital. The firm has total assets with a book value of $48.6 million and a market value of $53.4 million. How do you recommend the firm finance this transaction? Is there a danger that ACME could damage..
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