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JET FAB bought a CNC laser cutting machine at a cost of $750,000 to meet the specific needs of customer that had given a 4-year contract with the possibility of extending the contract for another 4 years. The company uses the MACRS depreciation method for this equipment as a 7-year property for tax purposes. The income tax rate for the company is 42%, and the company expects to have an after -tax rate of return of 8% in all its investments. The laser cutting machine generated an annual income of $250,000 for the first four years. The customer decided not to renew the contract after 4 years due to circumstances beyond its control. Consequently, the company ended up selling the CNC laser cutting machine for $220,000. Determine if the company obtained the expected after-tax rate of return on this equipment.
Given a world with corporate taxes, rc , a personal tax rate paid on bonds, TpB , and a personal tax rate on income from equity, T ps, what would be the effect of a decrease in the corporate tax rate on the aggregate amount of debt in the economy.
Project K costs $35,000, its expected cash inflows are $11,000 per year for 12 years, and its WACC is 12%. What is the project's NPV? Round your answer to the nearest cent.
Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 –$ 39,400,000 1 63,400,000 2 – 12,400,000 a-1 What is the NPV for the project if the company requires a return of 10 percent?
Suppose that Facebook is selling at $75 per share. You are bullish on Facebook stock, and want to buy 1000 shares on margin. The initial margin is 50%. You can borrow from your broker at an interest rate of 6%. How much do you invest using your own m..
Suppose that a firm’s recent earnings per share and dividend per share are $2.65 and $1.60, respectively. Both are expected to grow at 8 percent. However, the firm’s current P/E ratio of 17 seems high for this growth rate. The P/E ratio is expected t..
Currently retaining all of their earnings and does not plan to pay dividends for the next 5 years. In the 6th year they plan on paying $0.65 per share with the dividend expected to grow at 6.25% per year. The company has a required return of 15%. Wha..
Lohn Corporation is expected to pay the following dividends over the next four years. what is the current share price?
The Green Corporation has ending inventory of $482,700, and cost of goods sold for the year just ended was $3,934,005. What is the inventory turnover? What is the days' sales in inventory?
Most US corporate bonds are investment grade. Most US corporate convertible bonds are investment grade. Investors react negatively (i.e., a
As a Small Investor with Income of $100,000 or less and with $100,000 to invest in one/several RE opportunities – What would you do and What Tax Benefits might you expect over the life of your investments?
Klondike Pharmaceuticals has several herb extractor evaporators that were purchased four years ago at a price of $20,000 (you can ignore inflation). These machines currently require annual maintenance costs of $2,000. Assume both all of this equipmen..
An economist has estimated that, near the point of equilibrium, the demand curve and supply curve for bonds can be estimated using the following equations:
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