problem1. On January 1, B. Edward Company entered in a lease for equipment rental. The company agreed to pay $4,500 per year for 10 years. The present value of all 10 lease payments is $31,941. Supposing the company categorized the lease as a capital lease, record the necessary journal entry to record the acquisition of equipment. The first lease payment is made at an end of year.
problem2. IBM's stock price is $22, it is anticipated to pay a $2 dividend and analysts anticipate the firm to grow at 10% per year for the next 5 years. TDI's stock price is $10, it is anticipated to pay a $1 dividend and analysts anticipated the firm to grow at 12% per year for the next 5 years. What is the differentiation in the two firm's required rate of returns?
problem3. Archer Daniels Midland Company is considering purchasing a new farm that it plans to operate for 10 years. The farm will need an initial investment of $11.80 million. This investment will comprise $2.30 million for land and $9.50 million for trucks and other equipment. The land, all trucks, and all other equipment are anticipated to be sold at the end of 10 years at a price of $5.21 million, $2.04 million above book value. The farm is anticipated to produce revenue of $2.01 million each year, and annual cash flow from operations equivalents $1.87 million. The marginal tax rate is 35 percent, and the proper discount rate is 10 percent. Compute the NPV of this investment.