Question
TOTAL ASSETS $14,500,000.00 TOTAL LIABILITIES $10,500,000.00 TOTAL STOCKHOLDER'S EQUITY $ 4,000,000.00 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $14,500,000.00 Redtrucks is looking to finance damage risk via
TOTAL ASSETS $14,500,000.00
TOTAL LIABILITIES $10,500,000.00
TOTAL STOCKHOLDER'S EQUITY $4,000,000.00
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $14,500,000.00
Redtrucks is looking to finance damage risk via third-party insurance. The financial information on the balance sheet will remain stable for the next decade.Redtrucks internal rate of return is 12%.
Redtruck also has received a quote from a highly rated third-party insurer who is promising that Redtrucks insurance premiums will be $160,000 per year for the next 10 years.
What will the cost of a third party vendor be? Be mindful this decision has a 10 year time horizon.Explain.
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Roberts, Hamdi Driss
8th Canadian Edition
01259270114, 9781259270116
