a. Explain why the existence of differential tax rates may be a good reason for leasing.
b. If leasing is tax motivated, who will have the higher tax bracket, the lessee or the lessor?

If leasing is tax motivated, who will have the greater tax bracket, lessee or lessor?

What is a lease?

Classify each substance in the table as either a metallic, ionic, molecular, or covalent network solid:

$$\begin{matrix} \text{Substance } & \text{Appearance } & \text{Melting Point } & \text{Electrical Conductivity } & \text{Solubility in Water}\\ \text{X} & \text{lustrous, malleable} & \text{}{1500^{\circ} \mathrm{C}} & \text{high } & \text{insoluble}\\ \text{y} & \text{soft, yellow} & \text{}{113^{\circ} \mathrm{C}} & \text{none} & \text{insoluble}\\ \text{Z} & \text{hard, white} & \text{}{800^{\circ} \mathrm{C}} & \text{only if melted/dissolved } & \text{soluble}\\ \end{matrix}$$

Classify each substance in the table as either a metallic, ionic, molecular, or covalent network solid:

$$\begin{matrix} \text{Substance } & \text{Appearance } & \text{Melting Point } & \text{Electrical Conductivity } & \text{Solubility in Water}\\ \text{X} & \text{brittle, white} & \text{}{800^{\circ} \mathrm{C}} & \text{only if melted/dissolved } & \text{soluble}\\ \text{y} & \text{shiny, malleable } & \text{}{1100^{\circ} \mathrm{C}} & \text{high } & \text{insoluble}\\ \text{Z} & \text{hard, colorless } & \text{}{3550^{\circ} \mathrm{C}} & \text{none } & \text{insoluble}\\ \end{matrix}$$

Discuss the frequency characteristics of the transformer. Use the applicable equivalent circuit and frequency characteristics.

All of the following are key differences between GAAP and IFRS with respect to accounting for inventories except the:

a. definition of the lower-of-cost-or-market test for inventory valuation differs between GAAP and IFRS.

b. average-cost method is prohibited under IFRS.

c. inventory basis determination for write-downs differs between GAAP and IFRS.

d. guidelines are more principles-based under IFRS than they are under GAAP.

Gamma Medical's stock trades at $\$ 90$ a share. The company is contemplating a $3$-for-$2$ stock split. Assuming that the stock split will have no effect on the market value of its equity, what will be the company's stock price following the stock split?

Dividends and Stock Price $\color{#c34632}\text{[Lo1]}$ Last month, Central Virginia Power Company, which had been having trouble with cost overruns on a nuclear power plant that it had been building, announced that it was "temporarily suspending payments due to the cash flow crunch associated with its investment program." The company's stock price dropped from $\$ 28.50$ to $\$ 25$ when this announcement was made. How would you interpret this change in the stock price (that is, what would you say caused it)?

Which of the following is considered a charitable lead trust?
a. The income of the trust fund goes to an individual until death, at which time the principal is conveyed to a charitable organization.
b. Charitable gifts are placed into the trust until a certain dollar amount is achieved and is then transferred to a specified charitable organization.
c. The income of a trust fund goes to a charitable organization for a specified time, with the principal then being conveyed to a different beneficiary.
d. A charity conveys money to a trust that generates income for the charity’s use in its various projects.

Beta Industries has net income of $\$ 2,000,000$, and it has $1,000,000$ shares of common stock outstanding. The company's stock currently trades at $\$ 32$ a share. Beta is considering a plan in which it will use available cash to repurchase $20 \%$ of its shares in the open market. The repurchase is expected to have no effect on net income or its stock price. What will be Beta's EPS following the stock repurchase?

Define each of the following terms:

a. Target payout ratio; optimal dividend policy

b. Dividend irrelevance theory; bird-in-the-hand fallacy

c. Information content (signaling) hypothesis; clienteles; clientele effect

d. Catering theory; residual dividend model

e. Low-regular-dividend-plus-extras

f. Declaration date; holder-of-record date; ex-dividend date; payment date

g. Dividend reinvestment plan (DRIP)

h. Stock split; stock dividend

i. Stock repurchase

Jet Corporation expects an EBIT of $23,500 every year forever. The company currently has no debt, and its cost of equity is 15%.

a. What is the current value of the company? b. Assume the company can borrow at 10%. If the corporate tax rate is 35%, what will the value of the firm be if the company takes on debt equal to 50% of its unlevered value? What if it takes on debt equal to 100% of its unlevered value? c. What will the value of the firm be if the company takes on debt equal to 50% of its levered value? What if the company takes on debt equal to 100% of its levered value?

Tool Manufacturing has an expected EBIT of $67,000 in perpetuity and a tax rate of 35%. The firm has$139,000 in outstanding debt at an interest rate of 6.85%, and its unlevered cost of capital is 10.25%. What is the value of the firm according to M&M Proposition I with taxes? Will the company change its debt–equity ratio if the goal is to maximize the value of the firm? Explain.