Problem 11–21a net present value analysis of a lease or buy decision [lo11–2] the riteway ad agency provides cars for its sales staff. in the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. the company's present fleet of cars is three years old and will be sold very shortly. to provide a replacement fleet, the company is considering two alternatives: purchase alternative: the company can purchase the cars, as in the past, and sell the cars after three years of use. ten cars will be needed, which can be purchased at a discounted price of $17,000 each. if this alternative is accepted, the following costs will be incurred on the fleet as a whole:

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

Aprimary advantage of organizing economic activity within firms is thea. ability to coordinate highly complex tasks to allow for specialized division of labor. b. low administrative costs because of reduced bureaucracy. c. eradication of the principal-agent problem. d. high-powered incentive to work as salaried employees for an existing firm.

To record a 6% stock dividend, accountants use to record a 55% stock dividend, accountants use a. par value per share; market price per share b. par value per share; par value per share c. market price per share; market price per share d. market price per share; par value per share