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Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $150,000 of equipment. She is unsure what depreciation method to use in her analysis, straight-line or the 3-year MACRS accelerated method. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight-line method). The applicable MACRS depreciation rates are 33%, 45%, 15%, and 7%. The company's WACC is 11%, and its tax rate is 40%.
What would the depreciation expense be each year under each method? Round your answers to the nearest cent.
Which depreciation method would produce the higher NPV?
How much higher would the NPV be under the preferred method?
Crypton Electronics has a capital structure consisting of 45% common stock and 55% debt. A debt issue of $1,000 par value, 6.2% bonds that mature in 15 years and pay annual interest will sell for $978.
Construct the balance sheet for GCP at the close of business on Day 31. Remember, the employee's salaries will have been paid at the beginnings of the day for the previous 15 days of salaries they have worked
Your company has 14 million shares of common stock outstanding. The common stock currently sells for $34 per share and has a beta of 1.2. The market risk premium is 10.5 percent and T-bills are yielding 2.0 percent.
Days sales in inventory will decline from 100 to 45 days and sales will be offset by most of the additional costs of accounts payable associated with increased purchases.
JaiLai Cos. stock has a beta of 0.9, the current risk-free rate is 6.0 percent, and the expected return on the market is 12 percent.
What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects
As a result, the board wants to reward her with a bonus to her retirement package. They are offering her $75,000 a year for 20 years, starting one year from her retirement date and each year for 19 years after that date.
Pujols Lumber Yard has a current accounts receivable balance of $441,516. Credit sales for the year just ended were $7,058,320. What is the receivables turnover
First National Bank charges 13.7 percent compounded monthly on its business loans. First United Bank charges 14.0 percent compounded semiannually.
Suppose the historical average annual return for the asset was 7.3 percent and the standard deviation was 8.4 percent. What is the probability that your return on this asset will be less than -4.5 percent in a given year
To finance the new venture two plans have been proposed. Plan A is an all common equity structure in which $2.3 million dollars would be raised by selling 86,000 shares of common stock.
You are analyzing the cross-store sales of a grocery store chain. As part of your analysis, you compute two measures of central tendency-mean and median.
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