Harman Company is considering leasing a warehouse under a $10-$year lease with lease payments of

$$120,000$ at the end of each year. The warehouse is valued at $$2$ million, $$1\mathrm{.}2$ million of which is

the land value and the remaining $$800,000$ is the value of the building. The building is eligible

for the CCA rate of $10\%$ on the declining balance. At the end of $10$ years, the building will have

no residual value but the land will have appreciated at $3\%$ per year over the $10-$year lease period.

The company can take a $10-$year loan at a $10\%$ annual interest rate and its tax rate is $40\%.$

$29.$ What is the NPV of the leasing for Shaan Company?

a$)$ $ $-305,460$

b$)$ $ $421,301$

c$)$ $ $57,284$

d$)$ $ $61,427$

$30.$ What maximum annual lease payment would be acceptable to Shaan Company in order to

lease the warehouse?

a$)$ $$200,000$

b$)$ $$129,242\mathrm{.}80$

c$)$ $$215,404\mathrm{.}03$

d$)$ $$951,227\mathrm{.}48$

e$)$ $$421,301\mathrm{.}25$

$31.$ Consider the start to$-$day of equally risky, all$-$equity financed firms C and D$,$ each of which has

issued its shares at $$50$ per share. Firm C will pay no dividends but firm D will pay all its earnings

as dividends. In a year from to$-$day, the stock of firm C is expected to be $$65$ per share. Firm D is

expected to pay $$15$ dividend per share at the year$-$end and its price at the year$-$end is expected to

be $$50$ per share. Capital gains are taxed at $20\%$ but the dividends income is taxed at $30\%.$ At

what share price should the stock of firm D be trading today in a competitive market?

a$)$ $$60\mathrm{.}50$

b$)$ $$45\mathrm{.}19$

c$)$ $$52\mathrm{.}42$

d$)$ $$48\mathrm{.}79$

$32.$ A firm with a residual dividend policy has a debt$-$equity ratio of $2$

$7.$ What must be its earnings to

set up a $$63,000$ capital budget without issuing new common shares to finance the budget?

a$)$ $$67,000$

b$)$ $$63,000$

c$)$ $$45,000$

d$)$ $$49,000$