2. g) One of the projects Evergreen is considering involves purchasing a new piece of manufacturing equipment. The capital budgeting analysis indicates that the equipment has a positive NPV of $500,000. The required initial investment in working capital for the project amounts to $50,000 payable at the beginning of the year and is growing at 10% annually over the life of the project. The equipment costs $1,400,000 to purchase, has a five-year useful economic life, and is a class 10 asset which has a CCA rate of 30% (assume half year rule applies). The salvage value of the equipment is $350,000 at the end of the five- year period. The equipment can be leased from Acel Leasing for five years for $300,000 per year, with the first payment payable at the beginning of the year. If Evergreen purchases the equipment, it will have annual operating costs of $50,000 per year. Under the terms of the lease, Acel will be responsible for the operating costs. Assume that the lease is a tax lease (qualified by the CRA for tax purposes). Calculate the Net Advantage to Leasing and explain whether the firm should buy or lease the asset. (17 marks)

Preview File Edit View Go Tools Window Help * ) 61% O % Wed 12:18 PM Q = FINA3361W2022A4.pdf (page 1 of 3) negg.com G Q Search Get Homework... 2. Stockholder... + Study tools My courses My boo Evergreen Inc's most recent Statement of Financial Position is given below. Evergreen Inc. Statement of Financial Position As at Dec 31, 2021 , per post Assets Cash $ 425,000 Accounts Receivable $ 400,000 Inventories $ 500,000 Total Current Assets $ 1,325,000 Net Fixed Assets $ 18,000,000 Liabilities Accounts Payable Other Current Liabilities Total Current Liabilities $ $ $ 300,000 425,000 725,000 estion is answered heck your work Our Honor Code LT Debt Common Stock (85,000 shares o/s) Retained Earnings $ $ $ 2,500,000 4,500,000 11.600.000 Total Liabilities & & Owners Equity n? LW Total Assets $ 19,325,000 $ 19,325,000 Additional Information: Current market price per common share = $ 195 Before tax cost of borrowing (secured loan) = 5% Weighted Average Cost of Capital =12% Net Income for 2021 = $925,000 Target D/E ratio based on market values= 0.25 Corporate tax rate = 35% Note: Parts a, b, c, d, e, and fare all independent of one another a) Show the change in the Owner's Equity section of the balance sheet if Evergreen declares a 15% stock dividend. What will be the new market price share? (6 marks) 22,779 APR 15 6 ? ? ? s ? Preview File Edit View Go Tools Window Help * ) 61% O % Wed 12:18 PM Q = FINA3361W2022A4.pdf (page 1 of 3) negg.com G Q Search Get Homework... 2. Stockholder... + Study tools My courses My boo Evergreen Inc's most recent Statement of Financial Position is given below. Evergreen Inc. Statement of Financial Position As at Dec 31, 2021 , per post Assets Cash $ 425,000 Accounts Receivable $ 400,000 Inventories $ 500,000 Total Current Assets $ 1,325,000 Net Fixed Assets $ 18,000,000 Liabilities Accounts Payable Other Current Liabilities Total Current Liabilities $ $ $ 300,000 425,000 725,000 estion is answered heck your work Our Honor Code LT Debt Common Stock (85,000 shares o/s) Retained Earnings $ $ $ 2,500,000 4,500,000 11.600.000 Total Liabilities & & Owners Equity n? LW Total Assets $ 19,325,000 $ 19,325,000 Additional Information: Current market price per common share = $ 195 Before tax cost of borrowing (secured loan) = 5% Weighted Average Cost of Capital =12% Net Income for 2021 = $925,000 Target D/E ratio based on market values= 0.25 Corporate tax rate = 35% Note: Parts a, b, c, d, e, and fare all independent of one another a) Show the change in the Owner's Equity section of the balance sheet if Evergreen declares a 15% stock dividend. What will be the new market price share? (6 marks) 22,779 APR 15 6 ? ? ? s