Firm is evaluating new machine to replace existing

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Reference no: EM132021349

1. A firm is evaluating a new machine to replace an existing, older machine. The change in depreciation is $3,000. The firm's marginal tax rate is 30 percent. Which of the following statements is true?

a. Depreciation is deducted from the terminal cash flows from an asset.

b. Depreciation expense is added to the initial outlay incurred to purchase an asset.

c. Depreciation is included in capital budgeting only if it exceeds the tax expense of an asset.

d. Depreciation is added to the after-tax net operating income to calculate the supplemental operating cash flow.

e. Depreciation does not affect the calculation of the supplemental operating cash flow.

2. A put and call option have an expiration date 6 months hence and an exercise price of 9.the interest rate for 6 months’ period is 3%,

If the put has a market price of 2 and share is worth 10 per share, what is the value of the call

If the put has a market price of 1 and the call 4 what is the value of the share per share

If the call has a market value of 5 and market price of the share is 12 per share, what is the value of the put

Reference no: EM132021349

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