Each of the four independent situations below describes a sales-type lease in which annual lease payments of $100,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Situation
1 2 3 4
Lease term (years) 7 7 8 8
Lessor's and lessee's
interest rate 9% 11% 10% 12%
Residual value:
Estimated fair value 0 $50,000 $8,000 $50,000
Guaranteed by lessee 0 0 $8,000 $60,000
Determine the following amounts at the beginning of the lease.
Situation
1 2 3 4
A The lessor's:
1. Lease payments 700,000 700,000 800,000
2. Gross investment in the lease 700,000 750,000 808,000
3. Net investment in the lease 5 590,574 548,592 547.137
B The lessee's:
4. Lease payments 700,000 700,000 800,000
5. Right-of-use asset 548,592 586,842
6. Lease payable 548,592 586,842

Calculate the cost of each capital component—in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). use both the capm method and the dividend growth approach to find the cost of equity. calculate the cost of new stock using the dividend growth approach. what is the cost of new common stock based on the capm? (hint: find the difference between re and rs as determined by the dividend growth approach and then add that difference to the capm value for rs.)assuming that gao will not issue new equity and will continue to use the same target capital structure, what is the company’s wacc? e. suppose gao is evaluating three projects with the following characteristics. each project has a cost of $1 million. they will all be financed using the target mix of long-term debt, preferred stock, and common equity. the cost of the common equity for each project should be based on the beta estimated for the project. all equity will come from reinvested earnings. equity invested in project a would have a beta of 0.5 and an expected return of 9.0%.equity invested in project b would have a beta of 1.0 and an expected return of 10.0%.equity invested in project c would have a beta of 2.0 and an expected return of 11.0%.analyze the company’s situation, and explain why each project should be accepted or rejected g

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Witch design elements is used to organize used to organize the text in orderly fashion?