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DogChew Products needs to replace its rawhide tanning and moulding equipment. me new equipment costs S930.000 and has a 5 year li has no salvage value. The new in Class 8 with a depreciation rate of 20%. The firm's tax rale is 39% and the firm can borrow money at 9%. The company can buy the new equipment or it can be leased for 5 years with a yearly before-tax lease cost of S245,000 payable in advance.
What is the net advantage of leasing? Should the firm purchase or lease the equipment?
Fyre, Inc., has a target debt−equity ratio of 1.50. Its WACC is 9.7 percent, and the tax rate is 40 percent. If the company’s cost of equity is 14 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 5 perce..
As chief financial? officer, it is your responsibility to weigh financial pros and cons of the many investment opportunities developed by your? company's research and development division. You are currently evaluating two competing? 15-year projects ..
During 2009, Raines Umbrella Corp. had sales of $736,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $574,000, $104,000, and $132,000, respectively. In addition, the company had an interest expense of $100..
The annual demand for a product is 1,500 units. The company orders 250 units each time an order is placed. The lead-time is 15 days, and the company has determined that 100 units should be held as a safety stock. There are 250 working days per year. ..
Why are stocks called "equities"? Are bonds also equities?- Why is limited liability important to investors who purchase stock?
Which of these may lawfully be used as part of a loan application evaluation process?
Suppose you pay $100,000 for an investment that will pay you $4,000 every six months. You can reinvest the 4,000 at an APR of 5%. Assuming in 10 years you will get back the $100,000, what is the EAR (effective rate of return) on your investment?
Portfolio Beta Your retirement fund consists of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.25. Suppose you sell one of the stocks with a beta of 1.0 for $7,500 and use the proceeds to buy another stock whose ..
DiPitro's Paint and Wallpaper, Inc., needs to raise $1.13 million to finance plant expansion. In discussions with its investment bank. DiPitro's leams that the bankers recommend a debt issue with gross proceeds of $1,000 per bond and they will charge..
The government is considering a proposal to allow even greater accelerated depreciation deductions than those specified by MACRS. For which type of company would the change be more valuable, a company facing a 10% tax rate on one facing a 30% tax rat..
Heavy use of off-balance sheet lease financing will tend to
A company with a 34% marginal income tax rate is considering an investment that is classified as 3-year property in the MACRS depreciation schedule. The investment has the estimated following benefits: What is the income tax owed in year 3? What is t..
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