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Mr. Sam K. Jones, a successful businessman, is considering erecting a small building on a commercial lot. A local furniture company is willing to lease the building for $9000 per year, paid at the end of each year. It is a net lease, which means the furniture company must also pay the property taxes, fire insurance, and all other annual costs. The furniture company will require a 5-year lease with an option to buy the building and land on which it stands for $125,000 after 5 years. Mr. Jones could have the building constructed for $82,000. He could sell the commercial lot now for $30,000, the same price he paid for it. He would depreciate the commercial building by modified accelerated cost recovery system (MACRS) depreciation. Mr. Jones believes that at the end of the 5-year lease he could easily sell the property for $125,000. What is the after-tax present worth of this 5-year venture of Mr. Jones has a 25% tax rate on ordinary income and 15% on capital gains? He use a 10% after-tax MARR.
Bayou Okra Farms just paid a dividend of $3.15 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 13 percent for the first three years, a return of 11 percent for the..
What is a credit rating? What is a credit spread?
Your company is considering a machine that will cost $ 5,908 at Time 0 and which can be sold after 3 years for $ 567 . To operate the machine, $ 881 must be invested at Time 0 in inventories; these funds will be recovered when the machine is retired ..
NetCare Inc. has warrants that trade for ?$11.29 each. The warrant carries the option to purchase a half share of common stock at a strike price of ?$41 per share. What is the speculative premium on the warrant if the stock price is ?$49.23 per? shar..
Why does it matter whether Social Security is considered a pension plan or an entitlement program? How does the Federal Accounting Standards Advisory Board (FASAB) direct that Social Security be reported? What unique issues does the federal governmen..
Nigel received a Land Rover from his mother as a gift. Mom had purchased the Land Rover two years earlier for $65,000, but its fair market value at the date of the gift was only $50,000. No gift tax was paid by Mom at time of the gift.
What is the effective cost of bank financing if the loan amount is $100,000, interest is discounted (advance), a 1% commitment fee is paid up front, and a 9% compensating balance is required? The stated interest rate is 8%
A good employee with a near perfect attendance record has suddenly been missing 2-3 days of work per week. His supervisor has repeatedly told him he must be at work daily, or he will be fired. Now, the supervisor wants to fire him, but has come to as..
If there is one thing that students are good at is calculating what their final grade is going to be. So in order to try to understand WACC a little better, let's have you calculate this student's final grade: Test #1 80% Worth 25% of final grade Tes..
Which statement is INCORRECT given the following Treasury quotes? The dealer is willing to sell this bond to you for 150.750% of par.
The Assignment for Accounting Modelling ACCT3003. Develop a spreadsheet model for a listed Australian company using advanced MS Excel functions as part of its construction with a written explanation of your financial model and how the output from ..
The Emerging Growth and Equity Fund is a “low-load” fund. The current offer price quotation for this mutual fund is $19.7, and the front-end load is 1.25 percent. A. What is the net asset value? B. If there are 18.8 million shares outstanding, what i..
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