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Sports Biz, a profitable company, built and equipped a $2,000,000 plant brought into operation early in Year 1. Earnings of the company (before depreciation on the new plant and before income taxes) is projected at: $1,500,000 in Year 1; $2,000,000 in Year 2; $2,500,000 in Year 3; $3,000,000 in Year 4; and $3,500,000 in Year 5. The company can use straight-line, double declining balance, or sum-of-the-years"-digits depreciation for the new plant. Assume the plant"s useful life is 10 years (with no salvage value) and an income tax rate of 50%.
Required:
Compute the separate effect that each of these three methods of depreciation would have on:
a. Depreciation
b. Income taxes
c. Net income
d. Cash flow (assumed equal to net income before depreciation)
Before one year, Mr. Seth Cohen invested $10,400 in 200 shares of 1st Industries, Inc. stock and just received a dividend of $600.00.
Computation of after-tax cost of debts and weighted average cost of capital and The capital structure of Dartex Industries and the pretax cost of capital for each component are shown
Assume the following facts about a firm's financing in the next year. Calculate the weighted cost of the capital of this project.
What is the break-even level of earnings before interest and taxes between these two capital structure options?
Would you realize a capital gain of capital loss from this bond? (c) Is this a premium bond or discount bond? Why?
If you haggle with the salesperson, you can buy the car for 22,500, but you will have to finance through the bank at 6.5%apr (compounded monthly). If you want to pay the car off in 5 yrs, which is the better deal?(Compare monthly payments)
Find the prepaid forward price and the forward price of a 30 month forward contract for a stock currently priced at $36, assuming that the risk free rate is 4% compounded continuously and that dividends are paid at continuous annual rate of 2.5%.
Titans, Inc. has 6 percent bonds outstanding that mature in 14 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $993 each. What is the firm's pretax cost of debt?
How would you evaluate the following statement: "A firm can reduce its currency exposure by diversifying across different business lines."
gitman zutter discusses several challenges that are unique operating globally e.g. political risk currency risk and
.Equalize the range of payoffs for the stock and the option. (Round your answer to two decimal places) The ratio of ending price to ending stock value is
The cost of equity capital is 12% and the pretax cost of debt is 7%. If the marginal tax rate of the firm is 40%,compute the weighted average cost of capital of the firm. Choose the answer that is closest.
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