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Heald and Swenson Inc purchased a drill press for $850,000 one year and nine months ago. The asset has a six year life and has been depreciated according to the following accelerated schedule.
Year 1 2 3 4 5 6
%of cost 55% 20% 10% 5% 5% 5%
The press was just sold for $475000. The firm's marginal tax rate is 35%. Calculate Heald and Swenson's taxable profit and cash flow on the sale. Assume depreciation is spred evenly within each year.
Seth borrows X from Tina and agrees to pay it back over 20 years using the sinking fund method. At the end of each year, Seth will deposit 400 into the sinking fund, as well as pay Tina the interest on the loan. If Tina charges Seth an annual effecti..
Drilling Experts, Inc. (DEI) finds and develops oil properties and then sells the successful ones to major oil refining companies. DEI is now considering a new potential field, and its geologists have developed the following data, in thousands of dol..
Pierce, an independent auditor, was engaged to audit the financial statements of Mayfair Construction Incorporated for the year ended December 31, 20X3. Mayfair's financial statements reflect a substantial amount of mobile construction equipment used..
Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate is 3.50 percent. The security’s liquidity risk premium is 1.20 percent and m..
What are Faith's marginal, average, and effective tax rates? What is Faith's taxable income and tax liability for the year?
Cheeseburger and Taco Company purchases 14,515 boxes of cheese each year. It costs $29 to place and ship each order and $6.68 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. Calculate..
Luke Coal Mining, Inc. is considering opening a strip mine, the cost of which is $4.4 million. Cash flows will be $27.7 million, all coming at the end of one year. The land must be returned to its natural state at a cost of $25 million, payable after..
You have 40 years left until retirement and want to retire with $5 million. Your salary is paid annually, and you will receive $50,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn an annual return ..
Sisters Corp expects to earn $8 per share next year. The firm’s ROE is 16% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%. Calculate the price with the constant dividend growth model. What is the present value of its g..
The constant growth model takes into consideration then the capital gains investors expect to earn on a stock. Two firms with the same expected dividend and growth rate must also have the same stock price. It is appropriate to use the constant growth..
Now that the board members of Felicia & Fred are planning to implement a new crystal jewelry product line, they are concerned about potential shareholder sentiment regarding the dilution of ownership interest. What is the likely effect on the weighte..
Teaser Rate Mortgage A mortgage broker is offering a 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 6.8 percent APR interest rate. After the second year, the mortgage interes..
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