uppose ABN AM just finished building their new headquarters on the Amsterdam Zuid-As. The total construction costs of the new building was €50,000,000. The building willdepreciate in a straight-line basis in 5 years, after which it will be worthless. The alternativeis that ABN AMRO will sell the building immediately to an investor and subsequently leaseback the building. If leased, the lease payments will be €11,000,000 per year for 5 years.Now suppose that (1) ABN AMRO's borrowing cost is 8%, (2) its tax rate is 30%, and (3) thelease qualifies as a true tax lease.If ABN AMRO does not sell and lease back the headquarters, what is the amount of thelease-equivalent loan?A) 26.2 millionB) 30.5 millionC) 39.7 millionD) question is unanswerable

Sale and leaseback is a financial arrangement where a company sells an asset it owns, such as real…

Answered: uilding their new headquarters on the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You are in discussions to purchase an option on an office building with a strike price of $95 million. The building is currently valued at $92 million. The option will allow you to purchase the building either six months from today or one year from today. Six months from today, accrued rent payments from the building in the amount of $1,070,000 will be made to the owners. If you exercise the option in six months, you will receive the accrued rent payment, otherwise, the payment will be made to the current owners. A second accrued rent payment of $1,070,000 will be paid one year from today with the same payment terms. The standard deviation of the value of the building is 35 percent and the risk-free rate is an annual percentage rate of 7 percent. What is the price of the option today using a two-state model with six-month steps? (Hint. The value of the building in six months will be reduced by the accrued rent payment if you do not exercise the option at that time.) (Do not round…
11) A new robotic welder can be leased for 5 years with annual payments of $300,000 with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be depreciated straightline to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8 percent and has a tax rate of 23 percent. What discount rate should be used for valuing the lease? A) 9.84 percent B) 19.72 percent C) 6.16 percent D) 8.00 percent E) 6.32 percent
please answer number 14:bes 221-engineering economics. please give detailed and correct answers. I will report to bartleby thos tutors who will give incorrect answers.
Dune Ltd is considering a project that will require the use of a crane that cost £600,000 when it was acquired four years ago and which has a current carrying amount (statement of financial position value) of £370,000. If the project is not undertaken, the crane could be sold for £180,000 or it could be used for another project. If it is used for the other project, the business will not have to purchase another crane for £250,000. The business uses the net present value (NPV) method to appraise investment projects. What is the relevant cost of the machine when calculating the NPV of the project? O a. £180,000 O b. £370,000 O c. £780,000 O d. £250,000 e. £600,000
You are in discussions to purchase an option on an office building with a strike price of $63 million. The building is currently valued at $60 million. The option will allow you to purchase the building either six months from today or one year from today. Six months from today, accrued rent [ayments from the building in the amount of $900,000 will be made to the owners. If you exercise the option in six months, you will receive the accrued rent payment. Otherwise, the payment will be made to the current owners. A second accrued rent payment of $900,000 will be paid one-year from today with the same payment terms. The standard deviation of the value of the building is 30 percent, and the risk-free rate is a 6 percent annual percentage rate. What is the price of the option today using six-month steps? (Hint: The value of the building in six months will be reduced by the accrued rent payment of ou do not exercise the option at the time
What is the future worth when leased ?
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $9,500 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed here: (the equipment has an economic life of 5 years). If your discount rate is 6.9%, what should you do? The net present value of the leasing alternative is $ (Round to the nearest dollar.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 - $39,000 Year 1 Year 2 Year 3 - $2,200 - $2,200 - $2,200 Year 4 - $2,200 Year 5 -$2,200 -
Mo Salah, owner of Liverpool Limited, was approached by a local dealer in air conditioning units. The dealer proposed replacing the old cooling system of the company with a modern, more efficient system. The cost of the new system was quoted at R140 000, but it would save R30 000 per year in energy costa. The estimated life of the new system is 10 years, with no salvage value expected. All capital projects are required to earn at least the firms cost of capital at 10%. Required: Calculate the projects Internal Rate of Return (IRR).

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