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1) A new washer costs $13,000. The old one is fully depreciated and can be sold for $4,000. The new washer will last 10 years and save $5,000 per year in expenses. The new washer will be depreciated on a straight line basis to zero. The tax rate is 26% and the required return is 15%. What is the NPV of this project? Answer to 2 decimals places, for example 543.12.
2) Two years ago, your firm bought a new machine for $5,000. The machine was depreciated on a MACRS 3 year schedule. Today, your company will sell the machine for $4,000. The tax rate is 24%. What are the after tax proceeds from the sale? Answer to 2 decimals, for example 105.21.
MACRS 3 Year
Year Amount
1 33.33%
2 44.45%
3 14.81%
4 7.41%
Discuss the advantages and disadvantages of each procedure from the viewpoint of both the firm and its bondholders.
Spectronix Inc. operates in a world of perfect capital markets, has no debt, and has a required 6. rate of return on equity of 10%. Assume the firm issues new debt with a required return of of 5% to repurchase 30% of the outstanding stock. What is th..
Calculate the expected rate of return, rB, for Stock B (rA = 12.00%.) Do not round intermediate calculations. Round your answer to two decimal places. ?%
If a $100 bond collateralized by this project promises an interest rate of 8%, then what is the prevailing cost of capital.
A bond has a coupon of 6%. It has a face value of $100. It pays interest semi-annually. The bond was issued on March 18th, 2013. The settlement date is March 21st, 2013. The maturity date is 3/23/2023. The first interest payment is June 18th, 2013. T..
What is the market value of the bond today (what should an investor pay for the bond today)?
What is your one best guess as to the value of the bond?
Gael Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II).
All short-term debt is considered temporary financing. A capital lease incurs tax deductible interest expense. An operating lease is not tax deductible.
A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $3 per share (D1= $3), and it is expected to grow at some constant rate g throughout time. What is the required rate of return on a preferred stock with a $50 p..
Discuss issues in Executive compensation (why are they paid more - what is the justification, what are some of the morale issues surrounding exec compensation among employees, what's really fair in terms of exec comp, how can exec comp packages be co..
The following are annual rates of return for U.S. government T-bills and U.K. common stocks. Year U.S Government T-Bills U.K Government Common Stock 2003 0.063 0.150 2004 0.081 0.043 2005 0.071 0.374 2006 0.090 0.192 2007 0.085 0.106. Compute the ari..
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