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For a new project, Indigo Ink Inc. had planned on depreciating new machinery that costs $300 million on a 4-year, straight-line basis. Suppose now, that Armstead decides to depreciate the new machinery on an accelerated basis according to the following depreciation schedule: Year MACRS Depreciation Rates Year 1= 20%, Year 2= 32%, Year 3= 19%, Year 4=12%, Year 5=11%, Year 6= 6%. The project for which the machinery has been purchased ends in four years, and as a result the machinery is going to be sold at its salvage value of $60,000,000. Under this accelerated depreciation method, what is the after-tax cash flow expected to be generated by the sale of the equipment in Year 4? Assume the firm's tax rate is 40 percent. A) $56,400,000 B) $36,000,000 C) $72,200,000 D) $51,600,000 E) $63,600,000
A bond will make its semi-annual interest payment of $80 exactly five days from today. You purchase this bond today, receive the interest payment five days from now, and sell the bond five days after that. Over then ten days you are holding the bond,..
An investor was expecting a return of 14.7% on her portfolio with a beta of 1.13 before the market risk premium decreased from 8 to 7%. Based on this change, what return should she now expect on the portfolio?
Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 8% pe..
Prepare a schedule of cash collections for May through July and compute the expected balance in Accounts Receivable as of July 31.
What effect do you think each of the following items should have on the interest rate that a firm must pay on a new issue of long-term debt? Indicate whether each factor would tend to raise, lower, or have an indeterminate effect on the interest rate..
Dye Trucking raised $280 million in new debt and used this to buy back stock. After the recap, Dye's stock price is $7.75. If Dye had 45 million shares of stock before the recap, how many shares does it have after the recap?
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2855 S$/US$. You have just placed an order for 24,000 motherboards at a cost to you of 231.00 Singapore dollars each. You will pay for the shipment wh..
A bond makes coupon payments semiannually. Suppose its coupon rate is 6%, the interest rate is 8%, and it matures in 4 years. What is the present value of the bond? How much will it be worth one year from now? How much will it be worth in 4 years?
A futures price is currently 100. At the end of six months it will be either 112 or 90. The risk-free interest rate is 5% per annum. What is the value of a six-month European call option with a strike price of 100?
A grandfather sets up a trust for his only grandchild. The trust consists of an annuity that will pay $5,000 monthly to the grandchild for 18 years. The annuity pays an annual return of 5% and makes the payments monthly at the end of the month. The a..
Rowan Company has a net profit margin of 8.3 percent, debt ratio of 58 percent, total assets of $5,106,200, sales of $6,663,600, and a dividend payout ratio of 62 percent. What will the firm’s new net profit margin have to be in order to achieve the ..
Post Card Depot, an large retailer of post cards, orders 6,509,060 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 6 times over the next year. Post Card Depot receives the same number of post cards each time it ..
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