What would the appropriate tax rate

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Reference no: EM131613739

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $20,700. Use of the truck will require an increase in NWC (spare parts inventory) of $2,700. The truck will have no effect on revenues, but it is expected to save the firm $16,700 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 35 percent. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

Year 0 1 2 3

FCF $ $ $ $

2-PDQ, Inc., expects EBIT to be approximately $11.1 million per year for the foreseeable future, and it has 40,000 20-year, 10 percent annual coupon bonds outstanding. (Use Table 11.1)

What would the appropriate tax rate be for use in the calculation of the debt component of PDQ’s WACC? (Round your answer to 2 decimal places.)

Reference no: EM131613739

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