Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Taxes are a cost, and, therefore, changes in tax rates can affect consumer prices, project lives, and the value of existing firms. The following problem illustrates this. It also illustrates that tax changes that appear to be "good for business" do not always increase the value of existing firms. Indeed, unless new investment incentives increase consumer demand, they can work only by rendering existing equipment obsolete.
The manufacture of bucolic acid is a competitive business. Demand is steadily expanding, and new plants are constantly being opened. Expected cash flows from an investment in a new plant are as follows:
0
1
2
3
1. Initial investment
100
2. Revenues
3. Cash operating costs
50
4. Tax depreciation
33.33
5. Income pretax
16.67
6. Tax at 40%
6.67
7. Net income
10
8. After-tax salvage
15
9. Cash flow (7 + 8 + 4 - 1)
-100
+43.33
+58.33
NPV at 20% =00
a. What is the value of a one-year-old plant? Of a two-year-old plant?
b. Suppose that the government now changes tax depreciation to allow a 100 percent write off in year 1. How does this affect the value of existing one- and two-year-old plants? Existing plants must continue using the original tax depreciation schedule.
financing strategy for renewable energyassume the renewable energy project you studied in week 4 is projected to be
you are considering the purchase of two 1000 bonds. your expectation is that interest rates will drop and you want to
A 10 year, 6% semiannual, $1,000 bond was issued and immediately the current market rates rose to 8% (compounded semi annually). How much could that bond be sold for today?
Explain how economic transactions between household savers of funds and corporate users of funds would occur in a world without financial institutions.
Holdup Bank has an issue of preferred stock with a $5.15 stated dividend that just sold for $88 per share. What is the banks cost of preferred stock? (Round your answer to 2 decimal places. (e.g., 32.16))
raceway motors issued a 20 years 8percent semiannual bond 3 years ago. the bond currently sells for 98.6percent of its
Sun Instruments expects to issue new stock at $34 a share with estimated flotation costs of 7% of the market price. The company currently pays a $2.10 cash dividend and has a 6% growth rate. What are the costs of retained earnings and new common s..
ABC wants to issue 12-year, zero coupon bonds that yield 8.73 percent. What price should they charge for these bonds if they have a par value of $1000? That is solve for PV. Assume compounding.
rhino inc. hired you as a consultant to help them estimate their cost of capital. you have been provided with the
you are given the following information stockholders equity 3.75 billion priceearnings ratio 3.5 common shares
Compute the weights for Disney's equity and debt based on the market value of equity and Disney's market value of debt, computed in step 5
a stock price is currently 42. its stock price will be either 45 or 38 one year from now. the risk-free rate is 5. a
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd