Question : Speed Racer, Inc. Speed Racer, Inc. thinking about retiring a $100,000,000 : 1325746

 

 

Speed Racer, Inc.

Speed Racer, Inc. is thinking about retiring a $100,000,000 issue of bonds that it sold to the public 20 years ago. The original maturity date for the bonds was 30 years.

 

67.Refer to Speed Racer, Inc. If the bonds were initially sold at 98, then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

a.$66,666.67

b.$666,666.67

c.$2,000,000.00

d.$3,266,666.67

 

 

 

 

68.Refer to Speed Racer, Inc. If the bonds were initially sold at 98, then what is the after-tax cash flow effect, today, of the accelerated amortization if Speed Racer is in the 40% marginal tax bracket?

a.$26,666.67

b.$266,666.67

c.$800,000.00

d.$1,306,666.67

 

 

 

 

 

 

69.What are the basic type of leases available to businesses?

a.operating leases

b.financial leases

c.capital leases

d.all of the above

 

 

 

70.Which type of lease has a term which is generally shorter than the economic life of the asset being leased?

a.operating lease

b.capital lease

c.financial lease

d.leveraged lease

 

 

 

71.In an operating lease, which party is typically responsible for maintenance costs on the asset?

a.the lessor

b.the lessee

c.the third party financing the asset

d.all of the above

 

 

 

72.You are interested in leasing an automobile for your company. You find that the lessor is offering you a 5-year lease on a car when the economic life on this car is considered to be 5.5 years. What type of lease must this be classified as if you agree to the terms?

a.lease and saleback

b.capital lease

c.operating lease

d.lease of convenience

 

 

 

73.What is the present value of an operating lease that involves payments of $5,000 per year (the end of the year) for 10 years with no possibility of purchase at the end of the lease term. Assume that the firm is in the 40% marginal tax rate and the pre-tax cost of debt for the firm is 8%?

a.$38,986.43

b.$23,391.86

c.$20,130.24

d.$18,000.00

 

 

 

 

74.What is the present value of an operating lease that involves payments of $8,000 per year (at the end of each year) for 12 years with no possibility of purchase at the end of the lease term. Assume that the firm is in the 35% marginal tax rate and the pre-tax cost of debt for the firm is 12%?

a.$60,918.39

b.$49,554.99

c.$39,596.96

d.$32,210.75

 

 

 

 

75.What is the accounting capitalized value of an operating lease that involves payments of $8,000 per year (at the end of each year) for 12 years with no possibility of purchase at the end of the lease term. Assume that the firm is in the 35% marginal tax rate and the pre-tax cost of debt for the firm is 12%?

a.$96,000.00

b.$49,554.99

c.$39,596.96

d.$32,210.75

 

 

 

76.If a borrower violates a covenant the lender may:

a.demand immediate repayment

b.waive the violation and continue the loan

c.waive the violation but alter the terms of the original debt agreement

d.any of the above are possible