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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 $4,500,000 and it would be depreciated straight-line to zero over three years. Because of radiation contamination, it will actually be completely valueless in three years. You can lease it for $1,925,000 per year for three years. Assume a 35 percent tax bracket. You can borrow at 14 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.)
NAL $
Consider the shareholder and corporate level tax consequences of the following alternative transactions:
The growing Internet retailer "Nile" corporation has shown impressive growth in sales over the past several years, with sales this past year at $220 million. If the company has a net profit margin of 1.5%, what would its net profit be? $____ million.
Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $276,000, has a four-year life, and requires $84,000 in pretax annual operating costs.
The derivatives markets are viewed by some to be highly risky and equivalent to gambling.
To reduce risk, senior management propose developing the service in three stages. Should the company pursue this project based on the expected NPV?
Skillet Industries has a debt–equity ratio of 1.8. Its WACC is 9.1 percent, and its cost of debt is 7.1 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What would the cost of equity be if the debt–equity r..
Dave & Co. is replacing a machine because it has worn out. At the end of its 5 year life, the new machine will not affect either sales or operating costs and will not have a salvage value. The new machine will have a zero rate of return. The new mach..
Draw and label a tree that shows the price of the stock today, after 6-months and after 1 year.
Our efforts to materially increase the normalized earnings of Berkshire will be aided - as they have been throughout our managerial tenure.
Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.01, while in the 180-day forward market 1 Japanese yen = $0.0105. 180-day risk-free securities yield 1.35% in Japan. What is the yield on 180-day risk-free securities in t..
Griffith Delivery Service purchased a delivery truck for $33,600. The truck has an estimated useful life of six years and no salvage value. For purposes of preparing financial statements, Griffith is planning to use straight-line depreciation. What i..
Emma, the sole shareholder of Quail Corporation (a C corporation), has the corporation pay her a salary of $300,000 in 2008. The Tax Court has held that $80,000 represents unreasonable compensation. Assuming Emma is in the 35% bracket in 2011, the Ta..
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