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- A worthless security had a holding period of six months when it became worthless on December 10, 2021. The investor who had owned the security had a basis of $20,000 for it. Which of the following statements is correct? a.The investor has a short-term capital gain of $20,000. b.The investor has a nondeductible loss of $20,000. c.The investor has a long-term capital loss of $20,000. d.The investor has a short-term capital loss of $20,000.Manning Imports is contemplating an agreement to lease equipment to a customer for five years. Manning normally sells the asset for a cash price of $100,000. Assuming that 8% is a reasonable rate of interest, what must be the amount of quarterly lease payments (beginning at the inception of the lease) in order for Manning to recover its normal selling price as well as be compensated for financing the asset over the lease term?Cassandra Company decides to enter the leasing business. The entity acquires a specialized packaging machine for P3,000,000 cash and leases it for a period of 6 years after which the machine is to be returned to Cassandra Company for disposition. The guaranteed residual value of the machine is P200,000. The lease term is arranged so that a return of 12% is earned by Cassandra Company. What is the annual rental payable in advance required to yield the desired return?
- Gerda Motors purchased custom-made machinery on January 1, 2018, in exchange for a three-year $300,000 note with a stated annual interest rate of 3%, which is paid at the end of each year starting on December 31, 2018 through December 31, 2020. Because it was so custom, Gerda did not know the fair value of the machinery. The market rate for a note of similar risk is 7%. A. What is the value of the machinery capitalized on the balance sheet on January 1, 2018? [ Select ] ["300,000", "273,000", "278,304", "268,508"] B. How much interest expense is recognized on December 31, 2018? [ Select ] ["19,481", "21,000", "9,000", "18,796"] C. What is the carrying value of the note on December 31, 2018? [ Select ] ["278,304", "268,508", "300,000", "288,785"] Please avoid image based solution thnxa. On January 1st, 2021, an investor enters into a 9-month forward contract on an asset. In February, April, June, and September, dividends are paid on the asset at a rate of 3%. In other months, dividends are paid at a rate of 2%. All dividend yields are expressed in semiannual compounding. The risk-free rate of interest over the period is 8% per annum with continuous compounding and the asset is worth $45.00 at contract initiation. What is the no-arbitrage price of the forward contract? b. What is the Convenience Yield and what does a higher or lower convenience yield reflect? c. Coming out of the COVID-19 pandemic and considering the Russia-Ukraine war, would you expect the convenience yield to lead to a normal or inverted market for oil futures prices? Explain NEED ANSWERS PLEASEDunbar Corporation can purchase an asset for $21,000; the asset will be worthless after 13 years. Alternatively, it could lease the asset for 13 years with an annual lease payment of $2,113 paid at the end of each year. The firm’s cost of debt is 7%. The IRS classifies the lease as a non-tax-oriented lease. What is the net advantage to leasing? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent.
- a. On January 1st, 2021, an investor enters into a 9-month forward contract on an asset. In February,April, June, and September, dividends are paid on the asset at a rate of 3%. In other months,dividends are paid at a rate of 2%. All dividend yields are expressed in semiannual compounding.The risk-free rate of interest over the period is 8% per annum with continuous compounding andthe asset is worth $45.00 at contract initiation.What is the no-arbitrage price of the forward contract? b. What is the Convenience Yield and what does a higher or lower convenience yield reflect? c. Coming out of the COVID-19 pandemic and considering the Russia-Ukraine war, would youexpect the convenience yield to lead to a normal or inverted market for oil futures prices?ExplainXYZ Builders Ltd needs to acquire the use of a crane for their construction business and are considering buying or leasing a crane. The crane costs Rs. 10,00,000, and is subject to the straight-line method of depreciation to a zero salvage value at the end of 5 years. In contrast, the lease rent is Rs. 2,20,000 per year to be paid in advance each year for 5 years. XYZ Builders Ltd can raise debt at 14 percent payable in equal annual installments, each installment due at the beginning of the year. The company is in the 50 percent tax bracket. Should the XYZ lease or buy the crane?An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $10 per square foot (PSF) with step-ups of $1 per year beginning one year from now. Required: a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10% discount rate.) b. The owner of ATRIUM believes that base rent of $10 PSF in (a) is too low and wants to raise that amount to $14 with the same $1 step-ups. However, now ATRIUM would provide ACME a $52,800 moving allowance and $128,000 in tenant improvements (TIs). What would be the present value of this alternative to ATRIUM? c. ACME informs ATRIUM that it is willing to consider a $13 PSF with the $1 annual stepups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $5 PSF for 20,000 SF per year. If…
- Keating Co. is considering disposing of equipment with a cost of $74,000 and accumulated depreciation of $51,800. Keating Co. can sell the equipment through a broker for $34,000, less a 8% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $49,000. Keating will incur repair, insurance, and property tax expenses estimated at $9,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is a.$10,464 b.$13,080 c.$6,104 d.$8,720Athena Investment Company is considering the purchase of an office property. After a careful review of the market and the leases that are in place, Athena believes that next year’s cash flow will be $100,000. It also believes that the cash flow will rise in the amount of $7,000 each year for the foreseeable future. It plans to own the property for at least 10 years. Based on a review of sales of properties that are now 10 years older than the subject property, Athena has determined that cap rates are in a range of .10. Athena believes that it should earn an IRR (required return) of at least 12 percent.a. What is the estimated value of this office property (assume a .10 terminal cap rate)?b. What is the current, or “going-in,” cap rate for this property?c. What accounts for the difference between the cap rate in (b) and the .10 terminal cap rate in (a)?d. What assumptions are being made regarding future economic conditions when using current comparable sales to estimate terminal cap…RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15% per year?
