Reference no: EM131853721
1. Boston, Inc. had a current share price of $58, and the firm had 1,000,000 shares of stock outstanding. The company is considering an investment project that requires an immediate $25,000,000 investment but will produce a stream of cash flow of $11,000,000 each year over the next 3 years then close. There is no salvage value. If Andover invests in the project, what would the new share price be? Andover's cost of capital is 10%. (Hint: consider how the project NPV affects the stock price)
$64.12
$60.36
$58.75
$55.04
$70.10
2. Medford, Inc. purchased some fixed assets three years ago at a cost of $1,840,000. It no longer needs these assets, so it is going to sell them today at a price of $570,000. The assets are classified as 5-year property for MACRS. The MACRS table values .2000, .3200, .1920, .1152, .1152, and .0576 for Years 1 to 6, respectively. What is the current book value of these assets?
$529,920
$574,210
$593,866
$614,720
$639,344
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