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Automobiles are often leased, and several terms are unique to auto leases. Suppose you are considering leasing a car. The price you and the dealer agree on for the car is $30,500. This is the base capitalized cost. Other costs added to the capitalized cost price include the acquisition (bank) fee, insurance, or extended warranty. Assume these costs are $750. Capitalization cost reductions include any down payment, credit for trade-in, or dealer rebate. Assume you make a down payment of $2,000, and there is no trade-in or rebate. If you drive 12,000 miles per year, the lease-end residual value for this car will be $21,400 after three years. The lease or "money" factor, which is the interest rate on the loan, is the APR of the loan divided by 2,400. The lease factor the dealer quotes you is .00283. The monthly lease payment consists of three parts: a depreciation fee, a finance fee, and sales tax. The depreciation fee is the net capitalization cost minus the residual value, divided by the term of the lease. The net capitalization cost is the cost of the car minus any cost reductions plus any additional costs. The finance fee is the net capitalization cost plus the residual, times the money factor, and the monthly sales tax is the depreciation payment plus the finance fee, times the tax rate. What is your monthly lease payment for a 36-month lease if the sales tax is 7 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
During the year, Belyk Paving Co. had sales of $2,389,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,436,000, $436,100, and $491,100, respectively. In addition, the company had an interest expense of $2..
Fama's Llamas has a weighted average cost of capital of 9.5 percent. The company's cost of equity is 15.5 percent, and its pretax cost of debt is 8.5 percent. The tax rate is 34 percent. What is the company's target debt-equity ratio?
Consider an investment for a new manufacturing process line within a manufacturing plant. Calculate the NPV for the investment.
What is its cost of common equity and its WACC?
Consider a project to supply 70 million postage stamps to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $380,000 five years ago; if the land were sold today, it would net you $330,000, aftertax. ..
What was Amazon's original business model? How has Amazon changed this model? How sustainable is this updated model?
First, to focus more on the relationship between debt and the cost of capital, can you or anyone else provide an example in which changes in leverage would not affect the cost of capital, and subsequently the viability of future projects and investme..
A convertible bond has a 8 percent coupon, paid semiannually, and will mature in 20 years. If the bond were not convertible, it would be priced to yield 7 percent. The conversion ratio on the bond is 20 and the stock is currently selling for $53 per ..
The Ensyder Nursing Home (ENH) is a zero growth firm with an EBIT of $250,000 and a corporate tax rate of 40 percent. Suppose that the present value of financial distress costs is estimated to be $800,000, and that at a debt level of $1 million, ENH ..
NoGrowth Corporation currently pays a dividend of $ 0.49 per? quarter, and it will continue to pay this dividend forever. What is the price per share of NoGrowth stock if the? firm's equity cost of capital is 14.8%?. What is the firms stock price?
A client has requested advice on a potential investment opportunity involving an income producing property. She would like you to determine the internal rate of return of the investment opportunity based on the following information. Expected Holding..
Compute the profitability index if the company's discount rate is 10%. We-Know-Widgets, Inc. is analyzing a project that requires an initial investment of $10,000, followed by cash inflows of $1,000 in Year 1, $4,000 in Year 2, and $15,000 in Year 3...
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