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PepsiCo is planning to acquire a fleet of trucks to support its new Pepsi Express distribution system in the Omaha area. The installed cost of the trucks is $777,000. The salvage value at the end of five years is expected to be $75,000 after-tax. The present value of the expected salvage is $42,600, after discounting at PepsiCo's cost of capital. The present value (using PepsiCo's after-tax cost of debt as the discount rate) of the depreciation tax shield from this project is $210,000. The present value of the after-tax lease payments (also using PepsiCo's after tax cost of debt as the discount rate) is $575,000. PepsiCo will incur (in present value terms) operating costs of $140,000 more, after-tax, if the trucks are owned than if they are leased.
What is the net advantage of leasing in this case? What should PepsiCo do?
Suppose the current exchange rate for the Polish zloty is Z 2.94. The expected exchange rate in three years is Z 3.01. What is the difference in the annual inflation rates for the United States and Poland over this period?
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 19 percent a year for the next 4 years and then decreasing the growth rate to 3 percent per year. The company just paid its..
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The sales for October, November and December are $20,000, $24,000 and $36,000, respectively. For any particular month of sales, the following percentages are received over time in cash: 10% in cash from that same month of sales; 60% in cash from the ..
Which of the following journal entries would be recorded if a business performed services for $400 cash and $1000 on account?
A Treasury bill has a bid yield of 3.66% and an ask yield of 3.6%. The bill matures in 129 days. Assume a face value of $1,000. What is the least you could pay to acquire a bill?
Newcomer Mills is a relatively new firm which will retain all of its earnings for the next four years. Four years from now, the firm expects to pay its first dividend of $0.25 a share. After that, it intends to increase the dividend by 4 percent annu..
You want to borrow $150,000 to start a new business. A bank will lend the money at 12.68% annual interest with annual payments for 15 years. What will be the interest expense for the first year?
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