1. Dog Up! Franks is looking at a new sausage system with an installed cost of $900 which will be fully depreciated straight-line over the project's 3-year life and then scrapped for $150. The system will save the firm $280/year in pretax operating costs, and the system requires an initial investment in a constant level of net working capital of $65. If the tax rate is 21% and the discount rate is 9%, what should the firm do?

The treasurer of Riley Coal Co. is asked to compute the cost of fixed income securities for her corporation. Even before making the calculations, she assumes the aftertax cost of debt is at least 1 percent less than that for preferred stock.

Debt can be issued at a yield of 13.4 percent, and the corporate tax rate is 40 percent. Preferred stock will be priced at $67 and pay a dividend of $5.50. The flotation cost on the preferred stock is $5.

a. Compute the aftertax cost of debt. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. Compute the aftertax cost of preferred stock. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  

c. Based on the facts given above, is the treasurer correct?
  

multiple choice

• No, the treasurer is incorrect.

• No, the treasurer is incorrect.

The Company XYZ had sales of $10,000 in 2019. The cost of goods sold was $8,000. There was no other expense or revenue in 2019. If the tax rate of the company is 40%, what will be the net income for company XYZ in 2019?

You expect that you will need to replace your furnace in 6 years at a cost of $16,939. How

much must you save, each month for 29 months, starting next month (the same amount

each month) if your savings account pays 2.81% APR (compounded monthly)?

1. The firm referred to in problem #1 has 3 projects available: One with a cost of $4000 and an IRR of 18%; one with a cost of $3000 and an IRR of 20%; and one with a cost of $6000 and an IRR of 6%. Do the following:
   
   Compute the optimal capital budget. In other words, how much capital must the firm raise in order to invest in all projects whose IRR exceeds the WACC?
   What projects should be accepted?

You expect that you will need to replace your furnace in 5 years at a cost of $16,447. How much must you save, each month for 14 months, starting next month (the same amount each month) if your savings account pays 2.27% APR (compounded monthly)?

Frankenstein Bicycles has an unlevered cost of equity of 0.21. Their bonds are worth 472,341 and their equity is worth 446,790. The debt rate is 0.02 and their tax rate is 0.40. What is Frankenstein's cost of levered equity?

A grader has an initial cost of $220,000 and an estimated useful life of 10 years. The salvage value after 10 years of use is estimated to be $25,000. What is the annual depreciation amount in the fourth year if the sum-of-the-years method of depreciation accounting is used?

Select one:

a. $19,500.00

b. $24,818.18

c. $28,363.64

d. $99,454.55

As the explicit risk of a project increases, the risk adjusted average cost of capital should be…

A) Increased, resulting in a greater NPV

B) Decreased, resulting in a greater NPV

C) Increased, resulting in a lower NPV

D) Decreased, resulting in a lower NPV