FINANCIAL MANAGEMENT: THEORY AND PRACT
15th Edition
ISBN: 9781305632455
Author: BRIGHAM E. F.
Publisher: CENGAGE L
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Chapter 19, Problem 4MC
Summary Introduction
Case Summary:
LS Inc wants to acquire new market data and quotation system for its new home office. The system receives the information from online services and display the data onscreen or may save it for later retrieval and system also allow customers to make call and can convey current quotes. Cost of the equipment is $ 1,000,000 and if the company wants to purchase the equipment, they can borrow a loan at an interest rate of 10%.
Useful life of equipment is 6 years and it comes under 3 years MARCS class or it can purchase a contract of 4 years where $20,000 have to be paid at the beginning of each year and it will be sold after 4 years and the residual value is estimated at $200,000. They thought of opting for leasing which will cost $260,000 and includes maintenance cost. Federal plus state tax is 40%.
To calculate: The net advantage of leasing
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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions
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Discount rate (WACC)
Common shares outstanding
7.60%
5,029.00 million
Net nonoperating obligations (NNO) $(8,747) million
NNO is negative, which means that Cisco has net nonoperating investments
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($ millions)
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2019
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$
1241
1303
1368
10673
11207
11767
1437 $
12354
302 ✓
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9918
9679
9445 ✔
0 ×
Cum. present value of horizon FCFF $
0 ×
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0 ☑
Total firm value
0 ☑
NNO
-8747 ✓
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5029
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Don't used hand raiting and don't used Ai solution
Don't used hand raiting and don't used Ai solution
Chapter 19 Solutions
FINANCIAL MANAGEMENT: THEORY AND PRACT
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