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AHS must install a new $1.5 million computer to track patient records in it's multiple service areas. it plans to use the computer for only 3 years, at that time a new systemwill be acquired that will handle both billing and patient records. The company can borrow money at a before-tax cost of 19%. In lieu of buying, AHS could lease the computer for 3 years. Assume the following facts apply; 1.) The computer falls into a 3 year class for depreciation, so the modified accelerated cost recovery system (MACRS) allowances are 0.33, 0.45, 0.15 and 0.07 in year 1 through 4 respectively. 2.) The companies marginal tax rate is 34% 3.)Tenative lease terms call for payments of $500,000 at the beginning of each year 4.) The best estimate for the value of the computer after 4 years of wear and tear is $300,000. What is the net advantage to leasing (NAL)?
What is the company's pretax cost of debt? If the tax rate is 38 percent, what is the aftertax cost of debt?
Assume John Richards pays income taxes at a 30 percent rate. He currently owns a not for profit (municipal) bond that pays 5 percent interest. What interest rate would have to be set on a for profit (corporate) bond to produce the same amount of usab..
Imagine you purchase an investment for $100, with a 6% interest rate yearly. The inflation rate over the next year is 3.6%. You sell the investment at the end of the year for $106. What is your real interest rate?
A new machine with an expected useful life of 4 years is expected to generate annual net cash flows of $15,000. What are the (rounded) cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?
Calculate how much these options are in or out of the money.
Every year, Fortune magazine publishes a list of the "World's Most Admired Companies" and Barron’s magazine publishes a list of the “World's Most Respected Companies." Choose one company from the top twenty on either of these lists from the most rece..
At the end of each quarter, a 30-year-old woman puts $2000 in a retirement account that pays 6% interest compounded quarterly. When she reaches 55, she withdraws the entire amount and puts it in a mutual fund that pays 8.7% interest compounded monthl..
The security market line (SML) is an equation that shows the relationship between risk as measured by beta and required rates of return on individual securities
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $27,000 per month for 25 years, with the first payment received 30 years and 1 month from now. He can af..
The accounts receivable period is always greater than or equal to the length of the cash cycle.
You purchased 1,000 shares of stock ABC for $34 per share and 300 shares of stock XYZ for $240 per share exactly one year ago. During the year, stock ABC paid a $1.60 dividend per share and XYZ did not pay a dividend. Calculate (i) the dividend yield..
Warren Motor Company sells $30 million of its products to wholesalers on terms of "net 30." Currently, the firm's average collection period is 48 days. In an effort to speed up the collection of receivables, Warren is considering offering a cash disc..
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