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CathFoods will release a new range of candies which contain antioxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. In addition, there will be $5 million spent on promoting the new candy line, which will be listed as an expense on the income statement. It is expected that the range of candies will bring in revenues of $4 million per year for five years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 35%, what are the incremental free cash flows in the SECOND year of this project?
A) $1.765 million
B) $2.015 million
C) $2.415 million
D) $2.500 million
Johnson Tire Distributors has an unlevered cost of capital of 13 percent, a tax rate of 34 percent, and expected earnings before interest and taxes of $1,700. The company has $3,200 in bonds outstanding that have a 6 percent coupon and pay interest a..
A company is expected to have a price per share of $7.80. If the company s preferred stock pays a dividend of $2.00 per year and has a required return of 5% what is the preferred stock s current price?
John purchased 100 shares of Black Forest Inc. stock at a price of $153.96 three months ago. He sold all stocks today for $157.67. During this period the stock paid dividends of $5.04 per share. What is John’s annualized holding period return (annual..
You estimate a company’s earnings and dividends will grow at a constant rate of 4% and want to determine the value of the stock. The company paid a dividend yesterday of $7 per share. The current10 year treasury rate is 2.3%, and the company’s beta i..
Multinational enterprises are sometimes compared to colonial enterprises that operated at the end of the 19th century. Colonial enterprises were often private firms that benefited from government protection and control of foreign countries. Is this a..
Olympic Enterprises has the following inventory data: Date June 1 Beginning inventory Quantity 5 unit cost $52 Date June 4 Purchase Quantity 10 unit cose $55 June 7 Sale Quantity 12 Unit cost? Date June 11 Purchase Quantity 9 Unit cost $58 June 14 Sa..
A woman recently died with only probate assets. Under the term of her will, she left her entire probate estate outright to her husband. The following are relevant facts concerning the estate. The amount of the allowable marital deduction is:
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $12.5 million. Calculate the net income and return on assets for the two ..
Constant Growth Valuation Crisp Cookware's common stock is expected to pay a dividend of $2 a share at the end of this year (D1 = $2.00); its beta is 1.05; the risk-free rate is 2.7%; and the market risk premium is 4%. what does the market believe wi..
To minimize collection float, a firm should do which of the following?
The price of ABC stock is currently $42 per share, but in six months you expect it to rise to $50. ABC does not pay a dividend. You buy a six-month call on ABC, with a strike price of $45. The option cost $200. What holding period return do you expec..
Sally Johnson loaned a friend $10,000 at 15% interest, compounded annually. The loan will be paid in five equal end-of-year payments. Sally expects the inflation rate to be 12%. After taking inflation into account, what rate of return is Sally receiv..
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