Comey products has decided to acquire some new equipment having a $200,000 purchase price. The equipment will last 4 years and is in the MARCS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) The firm can borrow at a 7% rate and pays a 25% federal-plus-state tax rate. Comey is considering leasing the property but wishes to know the cost of borrowing that it should use when comparing purchasing to leasing and has hired you to answer this question. What is the correct answer to Comey's question?

NZ Ltd has decided to install a new item of plant, which will cost $500,000. The following alternative financing arrangements are available: Purchasing finance by borrowing Amount borrowed                $500,000 Term of loan                          5 years Interest rate             9.7% payable annually Lease plan Amount of finance         $500,000 Term                                5 years True interest rate            9.1% Annual instalments         $128,880 Additional information The tax rate is 28%. Assume that tax benefits arising from deductible expenditures are received in the year of the expenditure. NZ Ltd uses the after-tax borrowing rate as a discount rate. Which financing option should NZ Ltd choose? Show your calculations of the cost of each financing option. Use whole numbers when rounding.

Galleon Industries is building a temporary manufacturing plant which will be completely removed after 5 years. The required initial cash outlays at Time 0 are as follows. Land --- $500,000New building --- 2,000,000Equipment --- 3,000,000 Galleon uses straight-line depreciation for tax purposes and will depreciate the building over 10 years and the equipment over 5 years. Galleon's effective tax rate is 40%. Revenues from the new plant are estimated at $1.5 million annually and cash expenses are estimated at $300,000 annually. At the end of the fifth year, the assumed sales values of the land and building are $700,000 and $800,000, respectively. The equipment will be removed at a cost of $80,000 and sold for $200,000. Galleon's net cash flow for period 5 would be a. $2,612,000.b. $1,040,000.c. $1,200,000d. $2,660,000.

XYZ Co is considering to purchase equipment that has 6 years of life and requires an initial capital outlay of $60 million. The equipment will be depreciated using straight line method to zero book value in 6 years. The salvage value of the equipment is expected to be $10 million in six years. The equipment is expected to increase revenue by $25 million and increase expenses by $8 million each year over the next six years. XYZ has an income tax rate of 20%, and a cost of capital of 12%. 5 1. Determine the initial cash flow of the investment at time 0, operating cash flow each year for the next 5 years, and the terminal cash flow of the investment in year 6. 2. Determine the net present value and internal rate of return of the investment. Should the investment be taken? 3. Copy and past your work done for this problem above to the right. Use Excel Goal Seek to find the cost of capital that results in a net present value of $5 million. (You should have the results of both 2. and 3. shown…