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##### What is the minimum lease payment that would make purchasing a computer system and writing a 6-year lease contract on it

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Question;Question 1) Show all work for creditWhat is the;minimum lease payment that would make purchasing a computer system and;writing a 6-year lease contract on it? The price of the computer system;is \$175,000, it is a five-year asset for depreciation purposes, it has a;residual value of \$3,000, it requires \$500 maintenance per year, the;cost of capital is 9%, and the corporate tax rate is 40%. (Note: MACRS;rates for Years 1 to 6 are 0.20, 0.32, 0.19, 0.12, 0.11 and 0.06.)Question 2) Show all work for creditDakota;Trucking Company (DTC) is evaluating a potential lease for a truck with;a 4-year life that costs \$40,000 and falls into the MACRS 3-year class.;If the firm borrows and buys the truck, the loan rate would be 10%.;The truck will be used for 4 years, at the end of which time it will be;sold at an estimated residual value of \$10,000. If DTC buys the truck;it would purchase a maintenance contract that costs \$1,000 per year;payable at the end of each year. The lease terms call for a \$10,000;lease payment (4 payments total) at the beginning of each year. DTC's;tax rate is 40%. Should the firm lease or buy? (Note: MACRS rates for;Years 1 to 4 are 0.33, 0.45, 0.15, and 0.07.)Question 3)What is IPO underpricing?Use the following information for questions 4 and 5A;company is planning to go public. Currently, the pre-IPO value of the;firm?s equity is \$95 million, the number of outstanding shares is 3.5;million, the company need to raise \$17 million, and the floatation cost;of new equity is 12%.Question 4) Show all work for creditCalculate the gross proceeds needed from an IPO given the following information.Question 5) Show all work for creditPart aWhat is the post-IPO equity value?Part bWhat is the offer price?

Paper#51954 | Written in 18-Jul-2015

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