Debt $100,000 Equity 300,000 Total assets $400,000 Total claims 5400,000 Show the balance shepts for both firms after the asset increases and calculate each firm's Show how Falco's balance sheet would look immediately after the financing if it capital- Would the rate of return (1) on assets and (2) on equity be affected by the choice of finan- a. new debt ratio. (Assume that the lease is not capitalized.) b. ized the lease. cing? How? 15-4 Misty River Minerals must install $5.6 million of new machinery in its Ontario mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that he following facts apply (1) The machinery falls into asset Class 38 with a declining balance CCA rate of 30% (2) Under either the lease or the purchase, Misty River must pay for insurance, property Lease versus Buy taxes, and maintenance. (3) The firm's tax rate is 26% . (4) The loan would have an interest rate of 10 % . (5) The lease terms call for $1,425,000 payments at the beginning of each of the next 4 years. (6) Assume that Misty River Minerals has no use for the machine beyond the expiration of the lease. The machine has an estimated residual value of $1,000,000 at the end of the fourth year. What is the NAL of the lease? NEL