24. Assume the CV for the above project is 1.28 (not correct!), and it is 0.90 for the small machine. If Omaha Breaks typically takes a risk-averse approach to its investment projects, which project would you recommend? 27 On August 14, 2018, the WSJ repo "Uber and Lyft drivers have lone complained pay. Now some are finding their own ways to In a modern twist on an age-old practice from the well cab industry, many drivers of ride-hailing services say are purposely taking longer routes to a destination in order to drive up a fare. Use box on Last page Unlike with taxis where passengers "get taken for a ride," it is Uber Technologies Inc. and Lyft Inc. that are responsible for covering the bill. Longhauling is among the tactics used by some drivers to maximize their take, reflecting the strained relationship between the contract workers and the companies over pay, the drivers say. 25. Stanley Inc. must purchase $6,000,000 worth of service equipment and is weighing the merits of leasing the equipment or purchasing. The company has a zero-tax rate due to tax loss carry forwards, and is considering a 5 year, bank loan to finance the equipment. The loan has an interest rate of 10% and would be amortized over 5 years, with 5 end-of-year payments. Stanley can also lease the equipment for 5 end-of-year payments of $1,790,000 each. How much larger or smaller is the bank loan payment than the lease payment? Note: Subtract the loan payment from the lease payment. Passengers aren't on the hook for the higher fare because they pay a fixed upfront price based on the app's estimate of the ideal route. And while drivers are encouraged to go the most direct route, they can choose to ignore their digital navigators for a route that tacks on extra miles. Use box on last page The drivers' pay is determined by the actual trip's mileage and time, which can vary based on traffic conditions or diversions 26. To finance some manufacturing tools it needs for the next 3 years, Waldrop Corporation is considering a leasing arrangement. Under the following assumptions, the present value of the cost of owning is $3,474 (that's negative). What is the net advantage to leasing (NAL)? Does this situation represent a financial agency problem? If not, please explain why not, showing yo understand the definition. If so, please identify the principal & agent and explain the problem. Conciseness and accuracy both count. Use box on last p: It can make 3 equal end-of-year lease payments of $2,100 each. The firm's tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $240, but this cost would be borne by the lessor if it leases. The tools will be obsolete and worthless after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3. year life. It can borrow $4,800, the purchase price, at 10% and buy the tools. The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year. Use box on last page mmend, MBL or command option Elevant NPV value at annual annuity TILL 10Ws the large wrecking ball outcomes. The marketing department stated the probability of much destruction Chigh demand) is 0.65, and if this state occurs, then the probability of subsequent mass destruction Chigh growth) is 0.90. But if minor destruction (low demand) occurs, then the probability of subsequent mass destruction is only 0.20. The NPV for each possible state, including the option for the firm to abandon and salvage the project after 2 years, is depicted in the decision tree. Negative values are in parentheses. ware, is e data are depreciation Please use this decision-tree for problems 22-24. 4596, 4. Revenues o be constant Vhat is the Omaha Breaks Large Wrecking Ball Alternative NPV in $000 36 Subsequent Mass Destruction (21) if abandoned $65,000 $60,000 $25,000 35.0% Much Destruction (16) No More Destruction if abandoned $9 ars, the the after man will Subsequent Mass Destruction (6) if abandoned Minor Destruction (19) Destruction (13) if abandoned 22. What is Omaha Breaks' expected NPV? - No More I Use box on last page options 23. What is the standard deviation (o) of the possible outcomes? Use box on last page
