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Zoso is a rental car company that is trying to determine whether to add 25 cars to its fleet. the company fully depreciates all its rental cars over four years using the straight-line method. the new
Zoso is a rental car company that is trying to determine whether to add 25 cars to its fleet. the company fully depreciates all its rental cars over four years using the straight-line method. the new cars are expected to generate $155,000 per year in earnings before taxes and depreciation for four years. the company is entirely financed by equity and has a 35 percent tax rate. the required return on the company's unlevered equity is 11 percent, and the new fleet will not change the risk of the company. the risk-free rate is 6 percent.
a. what is the maximum price that the company should be willing to pay for the new fleet of cars if it remains an all-equity company?
