How would the new depreciation assumption affect the company

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Reference no: EM131972157

Lucy's Music Emporium opened its doors on January 1, 2015, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes.

The company planned to depreciate its fixed assets over 20 years, but in December 2015 management realized that the assets would last for only 15 years.

The firm's accountants plan to report the 2015 financial statements based on this new information.

How would the new depreciation assumption affect the company's financial statements?

The firm's act liabilities would increase.

The firms reported 2015 earnings per share would increase. The firm's EBIT would increase. The firm's cash position in 2015 and 2016 would increase.

The firm's reported net fixed assets would increase. Meacham Enterprises' bonds currently sell for $1, 280 and have a par value of $1,000.

They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1.050. What is their yield to call (YTC)?

Reference no: EM131972157

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