On January 1, 2011, Deema Corporation signed a ten-year noncancelable lease for certain machinery. The...
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On January 1, 2011, Deema Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Deema to make annual payments of $100,000 at the end of each year for ten years with title to pass to Deema at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Deema uses the straight-line method of depreciation for all of its fixed assets. The weighted average cost of capital (WACC) for Deema Corporation is 8%. Weighted average cost of capital for the lessor is 10%. Deema Corporation is aware of the lessors WACC. In addition, Deema Corporation has the following activities/ financial information for the year ending December 31, 2011
Sales revenue $10,000,000
Costs of good sold .. $2,000.000
Income tax rate 40%
Weighted average number of common shares outstanding 10,000,000
Calculate basic earnings per share for Deema Corporation as of December 31, 2011.
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