Calculate the interest value , Financial Management

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1. Suppose a firm's tax rate is 35%. What affect would a $10 million operating expense have on this year's earnings?  What effect would it have on next year's earnings?

2. What effect would a $10 million capital expense have on this years earnings if the capital is depreciated at a rate of $2 million per year for five years? What effect would it have on next years earnings?

3. Suppose  the risk free interest rate is 4%. Having a $200 today is equivalent to having what amount in one year? Having $200 in one year is equivalent to having what amount today? Which would you prefer,$200 today or $200 in one year?

4. Your firm has a risk free investment opportunity where it can invest $160,000 today and receive $170,000 in one year, for what level of interest is this project attractive?

 

 


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