Please help with these 2 questions. The necessary appendix are in the SS below
Krawczek Company will enter into a lease agreement with Heavy Equipment Co. where Krawczek will make lease payments over the next ve years. The lease is cancelable and requires equal annual payments of $35,200 per year beginning on January 1 of the rst year. The last payment will be January 1 of year 5, and Krawczek will continue to use the asset until December 31 of that year. Other important information includes the following: . The fair value of the equipment is $235,000. . The applicable discount rate is an 8 percent annual rate. . The economic life of the asset is 10 years. . Krawczek does not guarantee the residual value of the asset at the end of the lease, and it does not expect to keep the asset at the end of the term. . The asset is a standard piece of equipment. c. What will be the interest expense shown on the income statement at the end of year 1? (Leave no cells blank be certain to enter "0" wherever required.) Interest expense - d. What will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank be certain to enter "0" wherever required.) Amortization expense I I The Robinson Corporation has $34 million of bonds outstanding that were issued at a coupon rate of 11.650 percent seven years ago. Interest rates have fallen to 10.850 percent. Mr. Brooks, the Vice-President of Finance, does not expect rates to fall any further. The bonds have 17 years left to maturity, and Mr. Brooks would like to refund the bonds with a new issue of equal amount also having 17 years to maturity. The Robinson Corporation has a tax rate of 30 percent. The underwriting cost on the old issue was 3.40 percent of the total bond value. The undenNriting cost on the new issue will be 2.20 percent of the total bond value. The original bond indenture contained a ve-year protection against a call, with a 7 percent call premium starting in the sixth year and scheduled to decline by one- half percent each year thereafter. (Consider the bond to be seven years old for purposes of computing the premium.) Use Appendix D for an approximate answer but calculate your nal answer using the formula and nancial calculator methods. Assume the discount rate is equal to the aftertax cost of new debt rounded up to the nearest whole percent (eg. 406 percent should be rounded up to 5 percent). c. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total inows I I d. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value I I Appendix D Present value of an annuity of $1, PV IFA PVA = A (1 + i)n Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 0.990 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 1.942 1.913 1.886 1.859 1.833 1.783 1.759 1.736 1.713 1.690 3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3. 102 3.037 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 10 9.471 8.530 8. 111 7.722 7.360 7.024 6.710 6.418 5.889 5.650 11 10.368 9.787 9.253 8.760 8.306 7.499 7. 139 6.805 6.207 5.938 10.575 9.954 9.385 8.863 8.384 7.943 6.814 6.492 6. 194 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.487 7.103 6.750 6.424 14 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 15 13.865 12.849 11.938 11.1 18 10.380 9.712 9. 108 8.559 8.061 7.606 7. 191 6.811 16 .......... 14.718 13.578 1 1.652 10.838 10.106 9.447 8.851 8.313 7.379 6.974 17 15.562 14.292 13. 166 12. 166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 20 18.046 16.351 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077 7.843 30 25.808 22.396 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 40 32.835 27.355 23. 115 19.793 17.159 15.046 13.332 11.925 10.757 8.951 8.244 50 39. 196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 10.962 9.915 9.042 8.304
