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The Option Value of a Lease

There's an oil leasing opportunity that looks too good to be true, and it probably is too good to be true: an estimated 1,500,000 barrels of oil sitting underground that can be leased for 3 years for just $1,000,000. It looks like a golden opportunity: pay a million, bring the oil to the surface, sell it at the current spot pri

Leasing or Owning New Equipment

Suppose Procter and Gamble ("P&G") is considering purchasing $15 million in new manufacturing equipment. If it purchases the equipment, it will depreciate it on a straight-line basis over the next five years, after which the equipment will be worthless. It will also be responsible for maintenance expenses of $1 million per year.

Close or retain a store

Shadow Inc operates three stores in a large metroploliian area. The company's segmented absorption income statement for the last quarter is given below: Total Uptown Downtown Westpark Store Store Store Sales $2,500,000 $900,000 $600,000 $1,000,000 Cost of goods sold 1,450,000 513,000 372,000

Solve: Lease Versus Buy

Assuming that Reynolds tax rate is 40 percent and the equipment's depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment would be $110 at the beginning of each year. If Reynolds borrowed and bought, the bank would charge 10 percent interest on the loan. Should Reynolds lease or buy th

Business plan for a new hotel

Prepare a business plan powerpoint briefing that consists of at least slides covering the below topics. The plan is for a new hotel in Florida. I have attached the template to be used. 1. Product a. What customer need will we satisfy? b. How can our product be unique? 2. Customer a. Who are our customers? What are their

Legalities of Zoya's Lease with Peerless

This response will be no more than 1 or 2 paragraphs with a legal argument that includes the following: 1. A brief restatement of the legal question posed. 2. A statement of the applicable law or rule that should be applied to the facts in this case. 3. A clear statement that explains how you applied the applicable law to the

Lease vs. Buy question

Craxton Engineering will either purchase or lease a new $756,000 fabricator. If purchased, the fabricator will be depreciated on a straight-line basis over seven years. Craxton can lease the fabricator for $130,000 per year for seven years. Craxton's tax rate is 35%. (Assume the fabricator has no residual value at the end of

Business Law Help

1. What areas of the Constitution pertain to your organization or business? Explain, using examples. 2. Why is it important for managers to understand legal terminology? Explain, using examples.

Railcar Leasing: Lessors' direct financing lease

See attached spreadsheet for resources. On January 1, 2005, Railcar Leasing Inc. (the lessor) purchased 10 used boxcars from Railroad Equipment Consolidators at a price of $8,345,540. Railcar Leasing, Inc. immediately leased the boxcars to the Reading Railroad Company (the lessee) on the same date. The lease calls for eight a

Decision Making and Costing Problems

Westcost Air Co. leases a single jet aircraft and operates between San Francisco and the Fiji. Flights leave San Francisco on Mondays and Thursdays and depart from Fiji on Wednesdays and Saturdays. Westcost Air Co. cannot offer any more flights between San Francisco and Fiji. Only tourist-class seats are available on its plan

Finance 370 MCQ questions

1. Which of the following statements best represents what finance is about? a. How political, social, and economic forces affect corporations b. Maximizing profits c. Creation and maintenance of economic wealth d. Reducing risk 2. The goal of the firm should be: a.

Expand production with overtime or lease another plant

The company needs to expand its production capacity. This can be done in one of two ways: using overtime in its current plant or leasing another plant. Overtime has a cost penalty (above regular time) of $3 per case of of product produced, and can only be used for up to 15,000 cases per year. Leasing another plant would entail a

Raising Additional Capital by Debt, Equity and Merger

Using the scenarios given in Week 2, calculate the capital that Blue Sky Airlines needs and indicate what sources you will use in your capital plan. Assume that if you go bankrupt you will only be able to secure debt based on aircraft assets - unsecured debt or stock sales options will not be available to you for the duration of

A Noncancelable Lease is Classified as a Capital Lease

On January 1, 2006, Lani Company entered into a noncancelable lease for a machine to be used in its manufacturing operation. The lease transfers ownership of the machine to Lani by the end of the lease term. The term of the lease is eight years. The minimum lease payment made by Lani on January 1, 2006, was one of eight equal

Doherty Lease Equipment Strategies

Doherty Company leased equipment from Lambert Company. The classification of the lease makes a difference in the amounts reflected on the balance sheet and income statement of both Doherty and Lambert. Required: a. What criteria must be met by the lease in order that Doherty Company classify it as a capital lease? b. What c

Leasing can be a way for an organization to hide a liability.

Leasing has become a way that many organizations attempt to hide liability. How is this possible? From an accounting standpoint, what must a company recognize in most basic leasing transactions? Describe the accounting literature around leasing and the many benefits.

Coinsurance and Deductible

Explain the concepts of coinsurance and deductible in relation to property insurance. Why do insurance companies have these clauses in their policies?

Types of debt and equity instruments

Based on Target's current financial statements (web link below), how can the types of debt and equity instruments be identified that the company uses? Do they have bank debt, long term debt provided by other financial institutions, bonds they have issued and different issuances of those bonds or other types of long term debt?

What is a lease?

What is a lease? Why would you choose to lease a capital item versus buy? What steps would one follow to decide whether to lease or buy a computer system?

Government and Nonprofit Accounting: 41 MCQ

1. A primary characteristic that distinguishes governmental entities from business entities is a) The need to generate revenues equal to or in excess of expenditures/expenses. b) The importance of the budget in the governing process. c) The need to provide goods or services. d) The correlation between revenues generated a

Thomas Corporation: lease or purchase equipment

I am working on a few problems to study from. Please provide detail for the 3 attached problems. Question 4. (15 points) Pierre Imports will be liquidated. Its current balance sheet is shown below. Fixed assets are sold for $900,000 and current assets are sold for $700,000. All fixed assets are pledged as collateral for

Pro Forma Finacial Statements for Apple Computer Inc

I need help in this area and would appreciate some assistance. -Create two-year pro forma financial statements that reflect current performance of the economy in general, the industry in particular, and global economic conditions. - Make recommendations that support your pro forma statements with regards to working capital

The owners of a corporation enjoy unlimited liability.

Answer True or False or select the right letter to the respective question. Thanks 1. The owners of a corporation enjoy unlimited liability. True OR False 2. Which of the following is a characteristic of an efficient market? a. Small number of individuals. b. Opportunities exist for investors to profit from publicly

Multiple Choice: Economic Units and Accounting

____ 121. Which of the following factors should be considered in determining whether an activity is treated as an appropriate economic unit? a. The similarities and differences in types of business. b. The extent of common control. c. The extent of common ownership. d. The geographic location. e. All of the above. ____