Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $400 million. Since the primary asset of this business is real estate, Templeton's management has determined they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borro $290 million and invest only $110 million in equity in the acquisition. What weights should Templeton use in computing WACC for the acquisition? The appropriate wd weight is __%. (Round to one decimal place) did not match with any Answers results.

Answer 1

Your small business needs to buy new office furniture for your new headquarters. You have the option of leasing the furniture, or buying the furniture. You can purchase the furniture for $15,000 per year, or lease the same furniture for $5,000 per year for the next four years.

Your company has a marginal tax rate of 40%. Depreciation will amount to $3,750 per year and the furniture will be replaced after 4 years. If your company buys the furniture, they will borrow at 7%.

Required:
1.Calculate the total cost for both options.
2.Leasing vs. buying: which is the best option for your small business and why?