CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305661653
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 10, Problem 4PROB
Summary Introduction
Cost of asset includes all the cost which incurs for acquiring the machine. Cost includes shipping and installation cost.
MACRS stands for modified accelerated cost recovery system. Life of the asset will be classified as per the internal revenue code.
Five years MACRS rates, Year 1: 20%, Year 2: 32%, Year 3: 19.20% and Year 4: 11.52%, Year 5: 11.52%, Year 6: 5.76%.
XC purchased new machine to replace the old machine. The cost of machine is $500,000 and shipping & installation cost is $75,000. New machine falls under five years MACRS class.
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I am unsure how to solve this question. How do I calculate the values for the spaces marked with X?
Additional information:
Assume the M&M Model with corporate holds. Assume investors are taxed at a rate of 25% on equity income and 45% on debt income at personal tax rate.
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I am stuck on how to fill our this chart for corporate finance. I need to fill in the black spaces.
The problem is:
Assume an M&M world with no taxes. The risk-free rate of return is 5% and the market riskpremium is 8%. Perth Corp. is financed with equity and debt according to the percentageslisted in the table below.
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