Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation. SHOW YOUR WORK

4. According to the Pecking Order Theory of Stewart Myers, what is the pecking order that managers should follow in raising capital for investment? What exactly is the “cost” that Myers argues that managers should consider in raising capital, and why this is the relevant concern? Roughly, describe the magnitudes of these costs associated with the issue of various types of securities in the pecking order. Describe the Lemon Problem, advanced by George Akerloff, when there is informational asymmetry between two parties. When there are informational inefficiencies in markets, Myers argues that corporate actions send important signals to market participants. Describe the signals that stock issues and bond issues might send to markets about the firms’ prospects and explain why. Correspondingly, how do markets react to announcements of these two types of security issues?

Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $15 million in invested capital, has $3 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 60% and pays 11% interest on its debt, whereas LL has a 40% debt-to-capital ratio and pays only 10% interest on its debt. Neither firm uses preferred stock in its capital structure.

Calculate the return on invested capital (ROIC) for each firm. Round your answers to two decimal places.

ROIC for firm LL is %

ROIC for firm HL is %

Calculate the rate of return on equity (ROE) for each firm. Round your answers to two decimal places.

ROE for firm LL is %

ROE for firm HL is %

Observing that HL has a higher ROE, LL's treasurer is thinking of raising the debt-to-capital ratio from 40% to 60% even though that would increase LL's interest rate on all debt to 15%. Calculate the new ROE for LL. Round your answer to two decimal places.

Table below presents information on three US Treasury bonds:

Use this information to answer the following questions:

Suppose that US Treasury plans to issue 5% coupon bonds, which pay semi-annual coupons. The bonds will mature in 18 months. What is the price of these bonds?

Table below presents information on three US Treasury bonds:

Use this information to answer the following questions:

1. Is term structure increasing or decreasing? Please provide the explanation for the main reason for the term structure being increasing or decreasing.

Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $24.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.18 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.43 million per year and cost $2.27 million per year over the 10-year life of the project. Marketing estimates 13.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 35.00%. The WACC is 10.00%. Find the IRR (internal rate of return).

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

Just wanted to know that I'm doing the process right. thanks

You plan to retire 31 years from now. You expect that you will live 25 years after retiring. You want to have enough money upon reaching retirement age to withdraw $150,000 from the account at the beginning of each year you expect to live, and yet still have $2,700,000 left in the account at the time of your expected death (56 years from now). You plan to accumulate the retirement fund by making equal annual deposits at the end of each year for the next 31 years. You expect that you will be able to earn 13% per year on your deposits. However, you only expect to earn 9% per year on your investment after you retire since you will choose to place the money in less risky investments. What equal annual deposits must you make each year to reach your retirement goal?

Question 18 options:

Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 21 years, and an annual coupon rate of 9.0%. Flotation costs associated with a new debt issue would equal 7.0% of the market value of the bonds. Currently, the appropriate discount rate for bonds of firms similar to Costly is 12.0%. The firm's marginal tax rate is 30%. What will the firm's true cost of debt be for this new bond issue?

Question 24 options:

Determine the net present value for a project that costs $58,500 and would yield after-tax cash flows of $9,000 the first year, $11,000 the second year, $14,000 the third year, $16,000 the fourth year, $20,000 the fifth year, and $26,000 the sixth year. Your firm's cost of capital is 5.00%.

Question 27 options:

Determine the internal rate of return for a project that costs -$149,500 and would yield after-tax cash flows of $23,000 the first year, $25,000 the second year, $28,000 the third year, $30,000 the fourth year, $34,000 the fifth year, and $40,000 the sixth year.

Question 28 options:

Lily Inc., is contemplating the purchase of a new $396,513 glass manufacturing system. Delivery costs for the system will amount to $33,218 and the firm will need to pay an additional $27,662 in modification costs. The firm spent the last six months traveling to several manufacturing plants to analyze various pieces of equipment, which cost the firm $23,676. The system will be depreciated straight-line to zero over its five-year life. The firm plans on salvaging the equipment at the end of four years for $86,061. The new system will increase pre-tax revenues by $152,124 per year, but pre-tax costs will also increase by $94,342 per year. The firm will be able to reduce working capital by $28,502 at the beginning of the project, but will repay this at the end of the project’s life. If the tax rate is 25 percent and the discount rate is 9.65%, what is the NPV for this project?

[Round the final answer to the nearest cent]

Marshall Inc., is looking at a new bottle system that costs $473,522. It will cost an additional $63,445 to modify the system for special use by the firm. The new equipment is classified as five-year property under MACRS (20%, 32%, 19.20%, 11.52%, 11.52%, and 5.76%). Suppose the bottle system will be scrapped for $70,609 at the end of year 4. The new system will increase pre-tax revenues by $249,600 per year, but pre-tax costs will also increase by $40,080 per year. The system requires an initial investment in net working capital of $39,616. If the tax rate is 32 percent and the discount rate is 6.37 percent, what is the NPV of this project?

[Round the final answer to the nearest cent]

NPV   Calculate the net present value for a 25​-year

project with an initial investment of $50,000

and a cash inflow of $8,000 per year. Assume that the firm has an opportunity cost of 18​%.

Comment on the acceptability of the project.

Pension Funds that are defined contribution plans ___________________________________.