Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1. To finance some manufacturing tools it needs for the next 3 years, Waldrop Corporation is considering a leasing arrangement. The tools will be obsolete and worthless after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life. It can borrow $4,800,000, the purchase price, at 10% and buy the tools, or it can make 3 equal end-of-year lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year and the entire principal paid at the end of Year 3. The firm's tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases. What is cheaper in today's (Year 0) dollars: purchase or lease?

2. Dunbar Hardware, a national hardware chain, is considering purchasing a smaller chain, Eastern Hardware. Dunbar's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $92.52 million, and they have determined that the appropriate discount rate for valuing Eastern is 16%. Eastern has 4 million shares outstanding and no debt. Eastern's current stock price is $16.25. What is the maximum price per share that Dunbar should offer and why this price, describe your offer price?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M938098

Have any Question? 


Related Questions in Basic Finance

The us express reported that the color distribution for

The US Express reported that the color distribution for plain M&M's was: 40%brown, 20% yellow, 20% orange, 10% green, and 10% tan. Each piece of candy in a random sample of 100 plain M&M's was classified according to col ...

1 why can the current movement toward establishing supply

1. Why can the current movement toward establishing supply chains be characterized as a revolution? 2. Compare the concept of a modern supply chain with more traditional distribution channels. Be specific regarding simil ...

1 describe how gatt evolved into the wto what are the major

1. Describe how GATT evolved into the WTO. What are the major differences between these agreements? 2. What are the differences between multilateral and bilateral trade agreements? 3. Describe how a company might use tra ...

Writing in the wall street journal vincent reinhart the

Writing in the Wall Street Journal, Vincent Reinhart, the former director of the Federal Reserve's division of monetary affairs, argued: The problem with securitization is that it dilutes individual responsibility. The m ...

Assume that the heights of men are normally distributed

Assume that the heights of men are normally distributed with a mean of 67.3 inches and a standard deviation of 3.5 inches. If 100 men are randomly selected, find the probability that they have a mean height greater than ...

1 what is the sinking-fund factor how and why is it used2

1. What is the sinking-fund factor? How and why is it used? 2. What is an internal rate of return? How is it used? How does it relate to the concept of compound interest?

Diamond inc recently paid a 110 dividend future dividends

Diamond, Inc recently paid a $1.10 dividend. Future dividends are projected at $1.14, $1.18, $1.22, and $1.25over the next four years, respectively. Beginning five years from now, the dividend is expected to increase by ...

1 how may the use of leases shift the risk of rising

1. How may the use of leases shift the risk of rising expenses from the lessor to the lessee? 2. What is the difference between base or face rents and effective rents? 3. What is meant by useable vs. rentable space? 4. W ...

David wheelock of the federal reserve bank of st louis

David Wheelock of the Federal Reserve Bank of St. Louis describes the following episode at the beginning of the Great Depression: Following the stock market crash [of October 1929], the Federal Reserve Bank of New York u ...

Visit the website for your state homeland security office

Visit the website for your state homeland security office. Where in government is this office? What grants and other assistance does it provide to local governments and citizens of the state? Is this office colocated wit ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro