Business, 01.04.2021 22:00 anher

You have been asked to review the cost of capital computation for Lemur Inc., a small retail company. The company currently has 100 million shares trading at $10 a share, no conventional debt. However, the firm has two lease commitments: (1) a lease commitment of $25 million a year for the next 10 years and (2) another lease commitment of $20 million a year for the following 6 years. If the cost of equity of the firm is 10%, the pre-tax cost of debt for the firm is 6% and the marginal tax rate is 40%, estimate the cost of capital. What is the reason for trying to estimate the capitalised value of the lease commitment when estimating the leverage ratio

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You have been asked to review the cost of capital computation for Lemur Inc., a small retail company...

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