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Presentation/PPT
27/08/2022
4.You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $290,000. The truck falls into the MACRS 10-year class, and it will be sold after 10 years for $29,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,900. The truck will have no effect on revenues, but it is expected to save the firm $123,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 35 percent. What will the cash flows for this project be during year 2?
$117,100
$98,220
$132,150
$70,800
5.Portfolio Beta You own $21,500 of City Steel stock that has a beta of 3.32. You also own $38,500 of Rent-N-Co (beta = 1.77) and $20,700 of Lincoln Corporation (beta = -.83). What is the beta of your portfolio?
4.88
1.52
1.00
4.26
6.Portfolio Beta You have a portfolio with a beta of .93. What will be the new portfolio beta if you keep 30 percent of your money in the old portfolio and 70 percent in a stock with a beta of 1.53?
2.46
1.23
1.00
1.35
7.FlavR Co stock has a beta of 2.08, the current risk-free rate is 2.08 percent, and the expected return on the market is 9.08 percent. What is FlavR Co’s cost of equity?
16.64%
20.97%
11.16%
13.24%
8.You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $190,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of $4,900. The truck will have no effect on revenues, but it is expected to save the firm $86,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 40 percent. What will the cash flows for this project be during year 2?
$112,400
$75,920
$81,100
$25,200
9.CAPM Required Return A company has a beta of 1.13. If the market return is expected to be 11.8 percent and the risk-free rate is 3.90 percent, what is the company’s required return?
12.83%
13.33%
17.23%
16.73%
10.Debt Management Ratios Trina’s Trikes, Inc. reported a debt-to-equity ratio of 1.93 times at the end of 2008. If the firm’s total debt at year-end was $10.70 million, how much equity does Trina’s Trikes have?
$5.54 million
$10.70 million
$1.93 million
$20.65 million
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