a. Karsted Air Services is now in the final year of a project. The equipment originally cost $23 million, of which 80% has been depreciated. Karsted can sell the used equipment today for $5.75 million, and its tax rate is 30%. What is the equipment's after-tax salvage value? Round your answer to the nearest dollar. Write out your answer completely. For example, 13 million should be entered as 13,000,000.

b.Clemson Software is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number.

c.Project L costs $40,000, its expected cash inflows are $9,000 per year for 7 years, and its WACC is 10%. What is the project's payback? Round your answer to two decimal places.

What are some public health initiatives that have ended in the following year?

Many movies are released each year and it would be interesting to be able to predict the Total Gross Revenues (in $1,000,000) from the box office based on a few predictors. The following predictors have been identified for 70 movies:

• BUDGET: Estimated budget in $1,000,000
• LENGTH: The length of each movie in minutes
• SCREENS: Number of Screens on Opening Weekend
• AWARDS: Number of Award nominations of entire cast in their careers
• GENRE: Type of movie: Action, Comedy or Drama recoded as Genre 1 and Genre 2
  • Genre1 = 1 if Action, 0 if not
  • Genre2 = 1 if Comedy, 0 if not

            The following partial output has been obtained:

Based on the above partial printout, answer the following questions:

1. What is the regression model?
2. Interpret the following coefficients: -0.433 and 4.777.
3. Is there sufficient evidence at the 5% level of significance to conclude that the model is useful at predicting Total Gross Revenues?
4. Determine the adjusted coefficient of determination and explain its meaning in the context of the problem.
5. What is the standard error of the estimate?
6. Does the “genre” of movie have a significant impact (at 5%) on the Total Gross Revenues? Justify.
7. Estimate the Total Gross Revenues for a Drama movie of 90 minutes produced with a $25,000,000 budget with a cast of actors who were nominated 6 times for awards. In addition, that movie was shown on 2,000 screens in the first weekend.

This year Evan graduated from college and took a job as a deliveryman in the city. Evan was paid a salary of $72,900 and he received $700 in hourly pay for part-time work over the weekends. Evan summarized his expenses as follows: (use 2020)

Calculate Evan's AGI and taxable income if he files single. Assume that interest payments were initially required on Evan’s student loans this year.

Evan's AGI__________

Taxable income_________

For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income statement:

Given a 9-year bond with YTM of 4% and a duration of 7.5, what is the expected percent price change/return for a 0.05% (5 basis-point/bps) shift up in market yields?

Given 1-year ZCB securities with 5.2% yield in GBP and 4.5% yield in EUR, and a spot exchange rate of GBP/EUR at 1.5408, what expected spot ex- change rate in 1-year would result in a break-even between the two instruments? Which bond would be a better investment given a 1Y forward exchange rate of GBP/EUR 1.4120?

1. Overconfidence is most likely to be displayed by:

A) A financial advisor with a three-year record of outperformance

B) An individual investor with 100% allocation to a broad equity index

C) The board of trustees of a college endowment fund comprised of liberal arts professors

D) A foundation with 100% allocation to risk-free government bonds because of low risk tolerance

-

-

2. A rational investor would most likely:

A) Use emotional cues to re-balance portfolios

B) Take shortcuts when making asset allocation decisions

C) Completely and accurately process covariance data

D) Be influenced by the frame of an investment decision

-

-

3. Sarah recently reviewed her portfolio as part of her year-end performance assessment. She sold several stocks that had positive results for the year but held on to two stocks that were below her purchase price. She did not re-evaluate the potential performance for these stocks. Which form of bias is she exhibiting?

A) Hindsight bias

B) Confirmation bias

C) Loss aversion

D) Overconfidence bias

You are considering the purchase of a 15 year bond with annual coupon of 9.5%. The bond has a face value of $1000 and makes annual interest payments. If you require an 11% yield on this investment:

What is the max price you are willing to pay for the bond?

Your total wealth at the end of 15 years if you purchased this bond will be? And how much did you earn in additional interest if you reinvested each coupon payment of $95 at 11% for the entire 15 years? Show work in the space below.

Verify that your realized yield at the end of 15 years is the same as the bond’s yield to maturity of 11%. What are the key risks in bond investments?

Richardson Company is in its first year of operations as a hardware and software retailer (with occasional consulting jobs). Richardson reports the following current year results (without respect to the type of entity): “Business” Income: Sales (net of returns and allowances) $ 490,000 Gross Consulting Fees Collected 30,000 Dividend Income (5% investment in Novice Software Co.) 4,000 Loss on Sale of Novice Stock ($28,000 - $33,000, held 11 months) ( 5,000) “Business” Expenses and Costs: Cost of Goods Sold (142,200) Salaries of 5 employees other than owner Tony Richardson ($30,000 each) (150,000) Payroll taxes paid on employees [($150,000 x .0765) + ($35,000 x .062)] ( 13,645) Health insurance coverage for employees ($3,000 x 5) ( 15,000) Retirement plan contributions for employees (10% of salaries) ( 15,000) MACRS depreciation on various company assets ( 35,748) Interest, rent, utilities, insurance, supplies, and miscellaneous expenses ( 59,337) Contributions to public charities ( 13,300) Compensation to Owners of “Business”: Reasonable salary compensation to Tony Richardson ( 65,000) Other cash payments to owners ( 20,000) Health insurance coverage for Tony Richardson ( 3,000) Retirement plan contribution for owner (10% of “reasonable salary”) ( 6,500) Tony and Ellen Richardson (both age 53) file a joint federal income tax return in the current tax year. They do not have any dependents. In addition to any compensation/income from the business described above, Ellen received a salary of $41,300 from ED Industries. Tony and Ellen also received $1,400 personal interest on a joint account, $1,200 personal dividends from jointly-held Thomson Company stock, and $9,200 from the sale of 100 shares of Thomson stock (originally acquired 5 years ago for $3,100). Tony and Ellen’s personal expenses for the year include $2,600 personal property taxes, $12,400 state income taxes, 10,300 charitable contributions (not including the amounts mentioned above), $8,800 interest on personal home mortgage, and $2,600 of unreimbursed employee expenses by Ellen.

Assuming that Richardson Company is operated as a C corporation (with Tony Richardson (DD) as a 100% shareholder), determine the final corporate income tax liability of Richardson Co., the Richardson’s final federal income tax liability any FICA taxes paid on Tony’s compensation by Tony and by Richardson Company. Determine the corporate income taxes paid, the FICA tax on TR paid by TR, the FICA tax on TR paid by the company, the unemployment tax on TR paid by the company, the federal income tax paid by the Richardsons, and the total taxes.