Please I am asking you very kindly to help me with these calculation for these p
ID: 2696796 • Letter: P
Question
Please I am asking you very kindly to help me with these calculation for these problems
1. Sutton corporation, which have zer taxate due to tax loss carry-forwards, in considering a 5 year, $ 6,000,000 bank loan to finance service equiptment. The loan has an interest rate of 10% and woould amortized over 5 years, with 5 end of year payments. Sutton can also lease the equipment for 5 year end to year payment of $ 1,790,000 each. How much larger or smaller is the bank loan payment than the lease payment? Note substract the loan payment from the lease payment.
2.The city of Charleston issued $3,000,000 of 8% coupon, 30 year semiannual payment, tax exempt muni bonds 10 year ago. The bond had 10 years of call protection, but now the bonds can be called if the city chooses to do so. The call premuium would be 6% of the face amount. New 20 year 6% semiannual payment bonds can be sold at par, but flotation costs on hte issue would be 2% of the amount of bonds sold. What is the net present value of the funding? Note that cities pay no income taxes hence taxes are not relevant.
3.Dakota trucking company is evaluating a potential lease for a turck with a 4 year life that costs $40,000 and fall into the MACRS 3 year class. If the firm borrows and buy the truck, the loan rate would be 10% and the loan would be amortized over the truck's 4 year life so interest expense for taxes would be decl9ined over time. The loan payment would be made at the end of each year. The truck will be used for 4 year, at the end of which time it will be sold at an estimated residua;l value of $10,000. If DTC buys the truck, it would purschaser maintaince contract that cost $1,000 per year, payable end of each year. The lease term which include maintenance, call for a $10,000 lease payment. (4 payment total) at the beginning of each year. DTC's tax rate is 40%. What is NAL (net advantage to leasing) Note:( MACRS rates for year 1 to 4 are 0.33,0.45., 0.15, and 0.07)
4.The State of Idaho issued $ 2,000,000 of 7% coupon, 20 year semiannual payment, tax exempt bonds 5 years ago . The bonds had 5 years of call protection, but now the state can call the bonds if it chooses to do so. The call premium would be 5% of the face amou7nt. Today 15- year, 5% semiannaul payment bonds can be sold at patr, but flotation costs on this issue would be 25. What is the net present value of the refunding? Because these are taxt bond, taxes are not relevant. Choose the answer: (a) $278, 606 (b) $292, 536 (c) $ 307,163, (d) $ 322,521, (e) $ 338,647
Explanation / Answer
1. $207,215
2.$453,443
3$997
4.$278,606