Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi tutors. Can someone help me with the following questions. Kindly solve all the questions. Illustration: ABC Lid has decided to acquire a piece of

Hi tutors. Can someone help me with the following questions. Kindly solve all the questions.

image text in transcribedimage text in transcribedimage text in transcribed
Illustration: ABC Lid has decided to acquire a piece of equipment costing Shs 240 000 of five years. The equipment is expected to have no salvage value ate the end and the company uses straight-line depreciation method on all it Fixed Assets. The company has two financing alternative methods available, leasing or borrowing. The loan has an interest rate of 15% requiring equal-year-end installments to be paid. The lease would be set at a level that would amortize the cost of equipment over the lease period and would provide the lessor with a 14% return on capital. The company's tax rate is 40%. Required: Compute the annual lease payments. b. Compute the PV of the cash out flow under lease financing C. Calculate the annual loan installment payment d. For each of the 5 years, calculate the interest and the principal component of the loan repayment. e- Calculate the PV of after tax cash flow under the loan alternative f. Which alternative is better and why?QUESTION ONE (a) State the differences between free trade areas, customs unions and common markets. (b) What economic benefits might countries gain from forming a common market? QUESTION TWO You have been retained by the management of an international group to advise on the management of its foreign exchange exposure. Required: (a) Explain the main types of foreign exchange exposure (b) Advise on policies which the corporate treasurer could consider to provide valid and relevant methods of reducing exposure to foreign exchange risk.KY2 Ltd has an issued share capital of 1D million ordinaryr shares with a par value of 1, on which it pays a constant dividend oflA per share. The market value per share was {2 estdividend. The company,r then proposed a 1 for 4 rights issue with an issue price of {l t], The money raised would be used to nanoe a maior new project. which was expected to increase annual prots aFter taxation hf; 950. This information is released together with the armounccment of lights issue. Required: {a} Compute the cumright price at the eveof the rights issue {b} Compute the theoretical est-rights price {c} Calculate the market price per share at the lime of the rights issue if the moneyr raised was to be used to redeem 3,T5,m of 3% debentures. The tax rate is Win

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Labor and Employment Law Text and Cases

Authors: David Twomey

15th edition

978-1133188285

Students also viewed these Economics questions