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A) Mining company can purchase a drilling machine for GH¢ 50,000. It also has the option to lease the drilling machine for GH¢12,200 a year for a 5-year period. The expected life of the machine is given as 5 years and expected to have a salvage value of GH¢5000 in 5 years’ time. The mining company intends to buy the drilling machine a fair market value at that time. If the mining company decides to buy the machine, it can acquire financing at 20%. The tax rate is 34%. Assume depreciation is on straight line basis and lease rentals are tax deductible. Would you advice the mining company to lease the asset? (Assume payment is made at the end of the year)
B) The Government of Ghana is in the process of issuing a 4-year bond which has a coupon rate of 15%. The Face value is GH¢1m per bond. The Government pays interest semi-annually. The company’s cost of capital is 20% per annum. a. Advice the company on how much they should pay for the bond b. Calculate the duration of the bond. c. If the bonds were issued by a private company, would you be prepared to buy the same amount as in (a). Justify your position.
Assume that Marriott uses only two WACC components – Debt and Equity (common stock). Calculate the WACC for each of the three Marriott divisions (lodging, contract services, and restaurants). Be sure to document and explain the reasons for any assump..
Fifteenth Bank has an issue of 7% preferred stock with a $100.00 par value that just sold for $109 per share. What is the bank’s cost of preferred stock? (Show your work and round your answer to two decimal places).
Decision on Accepting Additional Business Country Jeans Co. has an annual plant capacity of 63,000 units, and current production is 46,800 units.
What is the dollar value of the tax shield on that debt, just for this year, if Potlach is subject to a 35 percent marginal tax rate?
If the firm sold 1,100 units in February, what was its cost of goods sold (assume LIFO inventory accounting)?
A firm's bonds have a maturity of 15 years wuth a $1,000 face value, A 10 percent semiannual coupon, What is the yield to call?
Calculate the best-case and worst-case NPV figures.
Suppose the desired put option were traded. How much would it cost to purchase? What would have been the cost of the protective put portfolio?
1. firm a has 10000 in assets entirely financed with equity. firm b also has 10000 in assets but these assets are
A stock is trading at $90 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 16% (assume the market is in ..
Locker Company has a debt-equity ratio of .65. Return on assets is 9.8 percent, and total equity is $850,000. What is the equity multiplier? Return on equity? Net income?
Greta, an elderly investor, has a degree of risk aversion of A = 5 when applied to return on wealth over a 3-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of 3-year strategies. If the correlation coe..
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