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13. Loser Inc, which is losing money and is in urgent need of cash, is considering selling its entire fleet of trucks and leasing
13. Loser Inc, which is losing money and is in urgent need of cash, is considering selling its entire fleet of trucks and leasing them back. Leasing Capital has offered to buy the trucks for $50 million (which is their estimated market value) and lease them back to the firm for an annual cost of $4 million. The book value of the trucks is also $50 million, and they can be depreciated straight-line over the next 10 years to a salvage value of $10 million. Loser Inc has a pretax cost of debt of 10% and does not expect tohave taxable income in the foreseeable future,] a. Should Loser Inc do the sale and leaseback? wwwwwww b. Now consider the lease from the viewpoint of Leasing Capital, which has a pretax opportunity cost of 7% and faces a corporate tax rate of 40%. i. Should it agree to buy the trucks and lease them back? ii. How is it possible for both Leasing Capital and Loser Inc store to gain from the lease?
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a Should Loser Inc do the sale and leaseback To determine whether Loser Inc should do the sale and leaseback we need to compare the present value of t...Get Instant Access to Expert-Tailored Solutions
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