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A company with a 34% marginal income tax rate is considering an investment that is classified as 3-year property in the MACRS depreciation schedule. The investment has the estimated following benefits:
Year Before tax cash-flow
0 $-75,000
1 $10,000
2 $25,000
3 $50,000
4 $15,000
a) What is the income tax owed in year 3?
b) What is the estimated annual after-tax cash flow for year 4?
You are saving money for a down payment on a house. Suppose you want to have total savings of $20,000 in 10 years time and you have currently $5,000. What annual interest rate do you need to earn on your initial investment, assuming you contribute no..
Both Bond Bill and Bond Ted have 10.8 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 7 years to maturity, whereas Bond Ted has 24 years to maturity. if interest rates suddenly rise by 3%, what is the percentage ..
Discuss the key factors executives consider when choosing a discount rate to apply to forecasted cash flows. Compare and contrast other factors for-profit and not-for-profit executives may consider in their decisions about what projects to finance.
An initial investment of $27,775 followed by a single cash flow of $45,590 in year 6. (Round intermediate calculations to 0 decimal places, e.g. 1,251 and final answer to 2 decimal places, e.g. 15.25%.) IRR _______ %. An initial investment of $833,32..
A company is expected to pay their first annual dividend 2 years from now. That payment will be $1.50 a share. Starting in Year 3, the company will increase the dividend by 5% per year. The required return from common shareholders is 15%. What is the..
How much more would you be willing to pay for a machine that results in profits of $300 per month and lasts for 10 years as compared to the one that lasts for 5 years only? Assume that your weighted average cost of capital is 24%
Heginbotham Corp. issued 10-year bonds two years ago at a coupon rate of 8.1 percent. The bonds make semiannual payments. If these bonds currently sell for 102 percent of par value, what is the YTM?
A stock is currently priced at $32.90. Its dividend is expected to grow at a rate of 5% per year indefinitely. The stock's required return is 10%. The stocks's predicted price 3 years from now should be?
Ms. Prince wants to create a scholarship in honor of her parents at the law school from which she received her degree. She could endow the scholarship with $500,000 cash or with $500,000 worth of marketable securities with a cost basis of $318,000. I..
What price would an investor requiring a 7% return pay for a stock which just declared a dividend of $5.00 if the expected dividend and earnings growth rate was estimated at 0%? Please show work.
Smith Inc. is considering a project with an initial cost of $1.07 million. The project will not produce any cash flows for the first two years. Starting in year 3, the project will produce cash inflows of $667,000 a year for 6 years. This project is ..
On a typical day,U.C. Stars Vision Center writes $30,000 in checks, which take THREE days to clear. They receive an average of $40,000 in checks from patients on a daily basis, which take five days to clear. (Show your work) What is U.C.’s disburseme..
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