User Account

All Pages

What is the irr of the after-tax cash flows for each

Assignment Help Finance Basics
Reference no: EM13571762

A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,000 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 35 percent and can depreciate the investment for tax purposes using the five-year MACRS tax depreciation schedule. Suppose the opportunity cost of capital is 8 percent. Ignore inflation.

a. Calculate project NPV for each company.

b. What is the IRR of the after-tax cash flows for each company? What does comparison of the IRRs suggest is the effective corporate tax rate?

Reference no: EM13571762

Questions Cloud

Thomas eakins paintings the gross clinic and the agnew : thomas eakins paintings the gross clinic and the agnew clinic are realist depictions of 19th century surgeries. compare
An oil well now produces 100000 barrels per year the well : an oil well now produces 100000 barrels per year. the well will produce for 18 years more but production will decline
Rose wilson is entering her senior year as an accounting : rose wilson is entering her senior year as an accounting major and has a number of options for her summer break. her
Def company will issue 2000000 in 10 10-year bonds when the : def company will issue 2000000 in 10 10-year bonds when the market rate of interest is 12. interest is paid
What is the irr of the after-tax cash flows for each : a project requires an initial investment of 100000 and is expected to produce a cash inflow before tax of 26000 per
If you had the opportunity to have your own or your familys : if you had the opportunity to have your own or your familys portrait painted by either monet or renoir which artist
Samson inc is contemplating the purchase of a machine that : samson inc. is contemplating the purchase of a machine that will provide it with the net after-tax cash savings of
Suppose an investment offers to triple your money in 12 : text is fundamentals of corporate finance by ross westerfield jordan. the problem comes from chapter 5 amp5 and the
A two-year bond pays a coupon rate of 10 percent and a face : a two-year bond pays a coupon rate of 10 percent and a face value of 1000. in other words the bond pays interest of 100

Reviews

Write a Review

Finance Basics Questions & Answers

  Research structure

How would you structure a research proposal to send to the CMO? I've worked out a several items I would use and would like input on if you think they are good.

  What is the intrinsic value of deployment specialists stock

Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 20% for two years and then at 3% thereafter. If the required return for Deployment Specialists is 9.0%, what is the intrinsic value of Deployment Specialists ..

  Which are representative of the companyrsquos historical

which are representative of the companyrsquos historical average. the firm is expecting a 20 in sales next year and

  How to fit the numbers in to come up with this answer

what is the current value of the stock? A) $100 B) $105 C) $110 D) $120 I know the answer is B) $105 but can you please show me the full formula for P and how to fit the numbers in to come up with this answer?

  Has stock price changed since ipo what was the price at end

select a company that has gone public in the last few years on an organized exchange anywhere in the world. prepare a

  What is the definition of current liabilities why is it

what is the definition of current liabilities? why is it important to distinguish between current and long-term

  Compute the net interest expense to be reported for this

fair value hedge on january 2 2010 mac cloud co. issued a 4-year 100000 note at 6 fixed interest interest payable

  Mention three key financial statements and identify the

1. list three key financial statements and identify the kinds of information they provide to corporate managers

  Which of the following would make for the greatest increase

A portflio expected return is 12% its standard deviaiton is 20%, and the risk-free rate if 4%. Which of the following would make for the greatest increase in the portfolio's Sharpe ratio?

  Bonds-carrying value and interest expense

A company issues $5,000,000, 7.8%, 20-year bonds to yeild 8% on January 1, 2007. Using effective-interest amortization, what will the carrying value of bonds be on December 31, 2007 balance sheet?

  Calculating tcm free cash flows

TCM Petroleum is an integrated oil company headquartered in Fort Worth, Texas. The following are the information on its income statements for 2007 and 2008 (all dollar figures are in millions): Calculate TCM's free cash flows (FCF) for 2007 and..

  A stock has a beta of 114 the expected return on the

a stock has a beta of 1.14 the expected return on the market is 10 percent and the risk-free rate is 3.5 percent. what

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd