1) Roy Hobbs Bats begin producing a special bat for the 2014 season. The bat will require investment in new equipment priced at $300,000.00. The equipment will be straight-line depreciated to zero over a 10.00-year period.

a)What is the yearly depreciation for the equipment?

b)What is the book value of the equipment after the fourth year?

3)Dixie Chicken is about to close one of its fast food franchises. As part of the closing, the firm will sell a refrigeration unit and its cooking units. The book value of the refrigeration unit is currently $18,827.00, while the book value of the cooking unit is $4,293.00. A buyer has offered $9,326.00 for the refrigerator and $6,446.00 for the cooking unit. The tax rate facing the firm is 37.00%. What is the cash flow from selling these assets?

4)A firm is thinking about replacing an assembly line. The assembly line was purchased 23.00 years ago for $2.58 million. It has been straight-line depreciated over a 40-year time frame (straight-line to zero). Today, the firm believes it can sell the assembly line to a buyer for $610,418.00. It will use the cash flow from this transaction to offset the cost of a new assembly line. The tax rate facing the firm is 38.00%. What is the NSV from selling the old assembly line today?

5)A piece of newly purchased industrial equipment costs $915,144.00 and is classified as a seven-year property under MACRS. What is the book value of this piece of equipment at the end of year 3?

6) A firm buys a piece of equipment for $112,550.00 and will depreciate using the 3-year MACRS schedule. If the tax rate is 40.00%, what is the present value of the depreciation tax shield if the cost of capital is 10.00%?

16) The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $481,302.00 (including installation costs) and due to efficiency gains, would generate $132,704.00 per year in operating cash flows (accounting for taxes and depreciation) over the next five years. The old mainframe has a remaining book value of $42,661.00 and would be immediately donated to a charity for the tax benefit. Kimco's cost of capital is 8.00% and the tax rate is 39.00%.

a)What is the initial cash outlay (cash flow at year 0) for this project? (express as a negative)

b) What is the NPV for this project?