Firm L needs 10 vans. There are two options available: Firm L can buy 10 vans for 120,000 and have an economic lifetime of 5 years; or Firm L can enter into a true-tax lease for 5 years with 30,000 yearly payment, the first due immediately (5 payments: 0,1,2,3,4). The cost of debt for Firm L is 10%. The corporate tax equals 35%. Firm L follows a straight-line depreciation method. Compute which method is the best to obtain the vans. Answer choices: A) Buying and Leasing are equivalent B) Leasing C) Buying with a loan

Wolfson Corporation has decided to purchase a new machine that costs $3.6 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 24 percent. The Sur Bank has offered Wolfson a four-year loan for $3.6 million. The repayment schedule is four yearly principal repayments of $900,000 and an interest charge of 7 percent on the outstanding balance of the loan at the beginning of each year. Both principal repayments and interest are due at the end of each year. Cal Leasing Corporation offers to lease the same machine to Wolfson. Lease payments of $1,020,000 per year are due at the beginning of each of the four years of the lease.   a. What is the NAL of leasing for Wolfson? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) b. What is the maximum annual lease…

Consider a firm A that wishes to acquire an equipment. The equipment is expected to reduce costs by $5700 per year. The equipment costs $29000 and has a useful life of 7 years. If the firm buys the equipment, they will depreciate it straight-line to zero over 7 years and dispose of it for nothing. They can lease it for 7 years with an annual lease payment of $8000. If the after-tax interest rate on secured debt issued by company A is 7% and tax rate is 25%, what is the Net Advantage to Leasing (NAL)?(keep two decimal places) Answer: -18233.59

Please answer the following showing detailed working: Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information; a) Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000.00       Cost of debts 11%       cost of equity when unlevered 18%       Tax rate 31%       Debts $0 $10,000.00 $20,000.00 $30,000.00 Cost of Equity when levered         Equity         D/E         Vu         VL         WACC         b) Plot the results from the table into the following two graphs:i) Value of the firm vis-à-vis- Total debtii) Cost of capital of the firm vis-à-vis D/E ratio.iii) Which MM propositions have you demonstrated?

Kuehner estimates that it can lease Parker Road Plaza for $18.50 per square foot (GLA) base rent with a 3 percent overage on gross sales in excess of $200 per square foot (GLA). The company expects rents to increase by 5 percent per year during the lease period and tenant reimbursements to run $8 per square foot (GLA) and to increase at the same rate as rents. Kuehner expects to have the shopping center 70 percent leased during the first year of operation After that, vacancies should average about 5 percent per year. The vacancy losses should be cal-culated on the entire gross potential income, which includes minimum rents, percentage rents and tenant reimbursements. Sales, which are expected to average $210 per square foot (GLA) for the first year of operation, should grow at 6 percent per year. The operating expenses are expected to average $14 per square foot of GLA for the first year and will increase at the same rate as the rents. Kuehner will collect an additional 5 percent of…

You are trying to decide between two mobile phone carriers. Carrier A requires you to pay $195 for the phone and then monthly charges of $62 for 24 months. Carrier B wants you to pay $90 for the phone and monthly charges of $68 for 12 months. Assume you will keep replacing the phone after your contract expires. Your cost of capital is 4.4% APR, compounded monthly. Based on cost alone, which carrier should you choose? The EAA for plan A is $ (Round to the nearest cent.)

The cost to purchase the house that Bainters are considering is $195,000, but the Bainters plan to make a $40,000 down payment. The Bainters have been approved for a fixed-rate, 30-year mortgage with a 4.2%  annual interest rate for the remaining costs. They want to know how much they would pay on their loan each year as well as how much they would pay on their loan after 5 years, 10 years, 15 years, and 30 years. They also want to determine how much they would pay in interest on their loan when they repay the entire loan.   What are the amounts? remember to show or explain your calculations) the total amount paid in loan payments after 1year the total amount paid in loan payments after 5years the total amount paid in loan payments after 10 years the total amount paid in loan payments after 15 years the total amount paid in loan payments after 30 years