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Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $800,000 of equipment. She is unsure what depreciation method to use in her analysis, striaght-line or the 3-year MACRS accelerated method. Under the striaght-line depreciation, the cost of equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight0line method). The applicable MACRS depreciation rates are 33%, 45%, 15% and 7% as discussed in Appendix 12A. The company's WACC is 10%, and its tax rate is 40%.
a) what would the depreciation expense be each year under each method?
b) which depreciation method would produce the higher NPV, and how much higher would it be?
Which one of the following is the risk arising from the use of debt within the capital structure selected by a firm?
The person transferring assets to another person in a trust is called the
In class the equation for the valuation of a put option was derived. This is the expected value of the present value of the (nonnegative) payoff obtained in exercising the option. This is the Black-Scholes-Merton equation. Mimicking that derivation, ..
Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type..
Portfolio analysis You have been given the expected return data shown in the first table on three assets-F, G, and H- over the period 2013-2016. Expected return Asset F 2016 16%, 2017 17% 2018 18% 2019 19%- Asset G 2016 17% 2017 16% 2018 15% 2019 14%..
Guy A bought a share of stock at the beginning of 2011 and sold this share of stock at $45 today (end of 2011). During this holding period, he received $5 cash dividend. His holding period return, capital gain yield and dividend yield are __, __, and..
Martinez, Inc., has a total debt ratio of 0.48, total debt of $331,000, and net income of $42,250. What is the company’s total asset? What is the company’s total equity? What is the company’s return on equity?
Look at Vermont heritage, sales revenue, EBIT and bet income over three year period, would you classified as a growing diminishing or stable company?
Rolling Company bonds have a coupon rate of 7.60 percent, 18 years to maturity, and a current price of $1,266. What is the YTM? The current yield?
What are the key activity areas for securities firms? How does each activity area assist in the generation of profits and what are the major risks for each area?
How is the time value of money relevant to retirement planning? Discuss the TVM in terms that a non-financially savvy couple in their mid-forties could understand.
The closest approximation to the real, risk-free rate of interest is
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