Your company is considering an investment that would involve the following initial outlays: cost of equipment: $275467, installation: $28020, and change in NOWC: $37216. The equipment is classified to be depreciated according to the MACRS 3-year table, with the following depreciation schedule: year 1 = 33%, year 2 = 45%, year 3 = 15%, year 4 = 7%. What is the depreciation expense in year 2?

Joe and Jan are thinking of opening an Italian restaurant. Setting up the restaurant is very expensive and costs $400,000 today and $200,000 the first year. However, they expect to earn $150,000 their first year, $130,000 the next year, $100,000 the third year, $200,000 the fourth year, and a whopping $300,000 their fifth year.

If interest rates are currently 10%, should they open the restaurant of their dreams?

1
Assume that a project has a starting cost of $300,000 in year 1. $40,000 each year in Year 2, 3, and 4. Estimated benefits of the project are $0 in Year 1 and $ 120,000 each year in Year 2, 3, and 4. Use a discount rate of 7% and round the discount rate into two decimal points.

Calculate the NPV for this project.
calculate the project ROI.

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:

Suppose a company has proposed a new 4-year project. The project has an initial outlay of $70,000 and has expected cash flows of $20,000 in year 1, $23,000 in year 2, $29,000 in year 3, and $35,000 in year 4. The required rate of return is 12% for projects at this company. What is the discounted payback for this project? (Answer to the nearest tenth of a year, e.g. 3.2)

Mr. D works full-time as a systems analyst for a consulting firm. In addition, he sells plants that he raises himself in a greenhouse attached to his residence. During the past 5 years, the results from raising and selling the plants have been as follows: Year Net Profit (Loss) from Scenario 1:

2. Please create a scenario (Scenario 2) where the cumulative profits in years 1-4 are still $300 but the taxpayer would be in a better position regarding year 5 losses.

3. Comment on your answer to 2 above. Why is Scenario 2 better for the taxpayer?

Below are some data from the land of milk and honey

Compute nominal GDP, real GDP, and the GDP deflator for each year, using the information from the above table. The base year is 2013. Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year. What is nominal GDP for each of these three years? What is real GDP for each of these years? What is the GDP deflator for each of these years? What is the percentage growth rate of real GDP from year 2 to year 3? What is the inflation rate as measured by the GDP deflator from year 2 to year 3?

On January 1 of year 1, Arthur and Aretha Franklin purchased a home for $1.62 million by paying 220,000 down and borrowing the remaining $1.40 million with a 4.2 percent loan secured by the home. The Franklins paid interest only on the loan for year 1 and year 2 (unless stated otherwise). (Enter your answers in dollars and not in millions of dollars. Do not round intermediate calculations. Leave no answer blank. Enter zero if applicable.)

a. What is the amount of interest expense the Franklins may deduct in year 2 assuming year 1 is 2017?

b. What is the amount of interest expense the Franklins may deduct in year 2 assuming year 1 is 2018?
c. Assume that year 1 is 2019 and that in year 2, the Franklins pay off the entire loan but at the beginning of year 3, they borrow $310,000 secured by the home at a 4 percent rate. They make interest-only payments on the loan during the year and they use the loan proceeds for purposes unrelated to the home. What amount of interest expense may the Franklins deduct in year 3 on this loan?

On January 1 of year 1, Arthur and Aretha Franklin purchased a home for $1.86 million by paying 260,000 down and borrowing the remaining $1.60 million with a 5 percent loan secured by the home. The Franklins paid interest only on the loan for year 1 and year 2 (unless stated otherwise). (Enter your answers in dollars and not in millions of dollars. Do not round intermediate calculations. Leave no answer blank. Enter zero if applicable.)

a. What is the amount of interest expense the Franklins may deduct in year 2 assuming year 1 is 2017?

b. What is the amount of interest expense the Franklins may deduct in year 2 assuming year 1 is 2018?

c. Assume that year 1 is 2018 and that in year 2, the Franklins pay off the entire loan but at the beginning of year 3, they borrow $330,000 secured by the home at a 5 percent rate. They make interest-only payments on the loan during the year. What amount of interest expense may the Franklins deduct in year 3 on this loan? (Assume the Franklins do not use the loan proceeds to improve the home.)

Question 1-

A 3-year bond carrying 3.4% annual coupon and $100-par is putable at par 1 year and 2 years from today. Calculate the value of the putable bond under the forward rate curve below.

1-year spot rate: 2.0%;

1-year spot rate 1 year from now: 2.6%;

1-year spot rate 2 years from now: 4.1%.

Assume annual compounding. Round your answer to 2 decimal places (nearest cent).

Question 2-

A 3-year bond carrying 3.4% annual coupon and $9,000-par is putable at par 1 year and 2 years from today. Calculate the value of the underlying straight bond under the forward rate curve below.

1-year spot rate: 2.1%;

1-year spot rate 1 year from now: 2.7%;

1-year spot rate 2 years from now: 4.2%.

Assume annual compounding. Round your answer to 2 decimal places (nearest cent).