Western wood products to stave off takeover attempt

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1. 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 $7,430,000, 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 $2,175,000 per year for four years. Assume that the tax rate is 35 percent. You can borrow at 13 percent before taxes.

What is the NAL of the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NAL $   

Should you lease or buy?

Buy

Lease

2. Melvin was attempting to gain control of Western Wood Products until he realized that the existing shareholders in the firm had the right to purchase additional shares at a below-market price given his hostile takeover attempt. Thus, Melvin decided to forgo investing in this firm. What term applies to the tactic used by Western Wood Products to stave off this takeover attempt?

Pac-man defense

Shark repellent plan

Golden parachute provision

Greenmail provision

Share rights plan

Reference no: EM131918711

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