Jake the Dog Inc. is investing in a new portable iguana killing machine that will cot 1pts $210,000. The machine has a useful life of 6 years and falls into the 5-year property class for the depreciation purposes. The IRS MACRS schedule for the six years is () 20%, (2) 32%, (3) 19.2 % ( 4 ) 115256, (5) 1152 %, (6)5.7653%.It will generate $50000 per Time R Aberdt year of savings for Jake and can be sold for $50,000 at the end of the 6-year period Jake's corporate tax rate is 32% In addition, Jake has 2000 outstanding 9% annual 45 Min 24/7P Coupon bonds with a $ 1000 oar value, 20 years to maturity and a price of $1085 Jalke also has 80,000 sráres of semmon stock outstanding that is selling for $45 per share This stock has a teta di 225(lis Jakel heis arisky dog-dude!), the expected market return is 1295 and the fisk-free rate ls 5% Finally, Jake has 36,000 shares preferred stock outstanding that pays a 3.5% dividend and sells for $40 per share. Using the WACC and the OCF's what is the NPV of Jake's iguana killing project (do not forget about the sale of the machine at the end)? (A)$15.546 (B) $11.430 (C) $-29,784 (D) $13.625 (E) $45.987
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Jake the Dog Inc. is investing in a new portable iguana killing machine that will cot 1pts $210,000. The machine has a useful life of 6 years and falls into the 5-year property class for the
(A)$15.546
(B) $11.430
(C) $-29,784
(D) $13.625
(E) $45.987
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