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For a new project, Indigo Ink Inc. had planned on depreciating new machinery that costs $300 million on a 4-year, straight-line basis. Suppose now, that Armstead decides to depreciate the new machinery on an accelerated basis according to the following depreciation schedule: Year MACRS Depreciation Rates Year 1= 20%, Year 2= 32%, Year 3= 19%, Year 4=12%, Year 5=11%, Year 6= 6%. The project for which the machinery has been purchased ends in four years, and as a result the machinery is going to be sold at its salvage value of $60,000,000. Under this accelerated depreciation method, what is the after-tax cash flow expected to be generated by the sale of the equipment in Year 4? Assume the firm's tax rate is 40 percent. A) $56,400,000 B) $36,000,000 C) $72,200,000 D) $51,600,000 E) $63,600,000
Consider a standard mortgage (360 months) with monthly payments and a nominal rate (monthly compounding) of 6.70%. What portion of the payments during the first 30 months goes toward principal? 14.80% 15.37% 15.32% 15.44% 14.62%
Last year, Stewart-Stern Inc. reported $11,250 of sales, $4,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds outstanding that carry a 6.5% interest rate, and its federal-plus-state income tax..
You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below: Asset Investment Beta Stock A $ 142,000 .87 Stock B $ 138,000 1.32 Stock C 1.47 Risk-free asset..
(Calculating the rate of return) A friend promises to pay you $600 three years from now if you loan her $500 today. What interest rate is your friend offering you? (Calculating the future value of an annuity). Define the Capital Asset Pricing Model (..
IM Solutions common stock sells for $42 a share and has a market rate of return of 15% per year. If the company’s last annual dividend was $1.40 per share, what is the projected annual average dividend growth rate?
Treasury bonds paying an 6.75% coupon rate with semi annual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually?
Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of $1,800,000. Addition of new species will cost another $310,000. Additional maintenance, food, and animal care and replacement will cost $1..
"Atlantic Airlines Case Atlantic Airlines issued $100 million in bonds in 2008. Because of the firm's low credit rating (B3), the bonds were considered junk bonds. At the time of the issue, the 20 year bonds were paying a yield of 12 percent. If the ..
Jacquie plans to deposit $3500 into her savings account for each of the next 5 years, and then $2000 per year for 5 years after that (all at the year end) she anticipates interest rates to be 6% for the next 3 years and then 9% thereafter. How much w..
Stephan and Chris have decided to acquire CellU in order to expand TechU’s product line. They are trying to decide how to finance the acquisition, and are currently looking at financing it by issuing bonds. They are thinking about issuing 11 percent ..
Seven years ago XYZ International issued some 31-year zero-coupon bonds that were priced with a market's required yield to maturity of 12 percent and a par value of $1,000. What did these bonds sell for when they were issued?
The Onboard Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 21.2 percent a year for the next 3 years and then decreasing the growth rate to 4 percent per year. The company just paid its an..
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