6. Lucron Corp. is considering a project that will cost $310,000 and will generate after-tax cashflows of $96,000 per year for 5 years. The firm's WACC is 12% and its target D/E ratio is 2/3.The flotation cost for debt is 4% and the flotation cost for equity is 8%. What would be thenew cost of the project after adjusting for flotation costs?A) $328,390B$329,787$331,197D) $329,840E) $290,1607. When calculating weights for the WACC, it has become relatively common to use Net Debt.How is Net Debt calculated?A) Net Debt = Total amount of debt - Cash & Risk-Free SecuritiesB) Net Debt = Total amount of debt + Cash & Risk-Free SecuritiesC) Net Debt = Long-term Debt - Short-term DebtD) Net Debt Short-term Debt-Long-term DebtE) Net Debt- Long-term Debt-Short-term Debt + Cash & Risk-Free SecuritiesPlease use the following information to answer the next THREE questions.LNZ Corp. is thinking about leasing equipment to make tinted lenses. This equipment would cost$3,400,000 if purchased. The CCA rate on the equipment is 40% and the salvage value after itsfive-year life will be $350,000. There are no capital gains to worry about. The firm's corporate taxrate is 40% and its pre-tax cost of debt is 12%. WeLease Corp. has offered to lease the system toLNZ for payments of $710,000 per year for five years. These lease payments would be made atthe START of the year. Assume that the tax deductibility benefit of the lease payments occurs atthe same time the lease payments are made.8. What is the present value of the after-tax lease payments?A) $1,737,390B) $2,895,617C) $1,862,461D) $1,719,911E) $2,866,5183D) -S772,875E) $369,9689. Pretend that your answer to the previous question was exactly $2,000,000. If the present valueof the CCA tax shield on the equipment is $1,030,032, what would be the NAL for LNZ?A) $385,372B) $122,742C) $402,831Page 3 of 910. Now suppose that there are maintenance costs on the equipment of $30,000 per year for fiveyears (paid at year end). These costs would have to be paid by the firm if they purchase theequipment, but if they lease it instead, the maintenance costs are already included in the leasepayment. How would these maintenance costs affect the NAL for LNZ?A) The NAL would decrease by $30,000.B) The NAL would decrease by $73,410.C) The NAL would increase by $30,000.D) The NAL would increase by $73,410.E) The NAL would not be affected.Please use the following information to answer the next TWO questions.Your firm will either purchase or lease a new fabricator. If purchased, the fabricator will cost$940,000 and be depreciated for tax purposes on a straight-line basis over five years. The fabricatorhas no residual value at the end of the five years Your firm can also lease the fabricator for fiveyears (payments are made at the start of the year). The firm can borrow at 15% pre-tax. Assumethat the tax deductibility benefit of the lease payments occurs at the time the lease payments aremade.11. If the firm's corporate tax rate is 40%, what would the before-tax lease payment have to be tomake your firm indifferent between leasing and buying the fabricator?A) $166,467(B) $254,537C) $152,722D) $277,445E) There is not enough information.

As per guidelines, first question will be solved , for others repost question.

6. Lucron Corp. is considering a project that will cost $310,000 and will generate after-tax cash flows of $96,000 per year for 5 years. The firm's WACC is 12% and its target D/E ratio is 2/3. The flotation cost for debt is 4% and the flotation cost for equity is 8%. What would be the new cost of the project after adjusting for flotation costs? A) $328,390 $329,787 $331,197 D) $329,840 E) $290,160

6. Lucron Corp. is considering a project that will cost $310,000 and will generate after-tax cash flows of $96,000 per year for 5 years. The firm's WACC is 12% and its target D/E ratio is 2/3. The flotation cost for debt is 4% and the flotation cost for equity is 8%. What would be the new cost of the project after adjusting for flotation costs? A) $328,390 $329,787 $331,197 D) $329,840 E) $290,160

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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