Verano Inc

question 62

Multiple Choice

Verano Inc. has two business divisions-a software product line and a waste water clean-up product line. The software business has a cost of equity capital of 10% and the waste water clean-up business has a cost of equity capital of 7%. Verano has 50% of its revenue from software and the rest from the waste water business. Verano is considering a purchase of another company in the waste water business using equity financing. What is the appropriate cost of capital to evaluate the business?

• A) 10.0%
• B) 7.0%
• C) 8.5%
• D) 9.0%

Understand the net advantage to leasing (NAL) and how it is calculated.

Distinguish between operating leases and financial leases from an accounting perspective.

Understand the concept and implications of a sale and leaseback agreement.

Discuss the managerial and financial strategy considerations behind the decision to lease or buy.