RESPOND IN 300 WORDS Prompt: After you have finished reviewing your classmates workshop handouts, answer the following questions: What 2 topics were the most informative and interesting to you?What ne
August 25, 2020
1. Using the information in the Hanson Ski Products balance sheet for March 31, 1985 (Exhibit 2), and the fiscal year 1987 budgets (Exhibits 3 and
August 25, 2020
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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $290,000.

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 

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$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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