1 - Which of the following is (are) true?
1)T*D rd represents the present value of the stream of interest tax shields.
2)I(1 - T) r represents the present value of the firm's operating cash flow stream, calculated as though the firm had no debt
3)The value of a leveraged firm when considering only the tax effect can be presented in a simplified formula as given by: VL = VU + T*D.
4)all of these
Last question option 4 is
$439.211.23
RQ17.4 & 17.5. Shaker Corporation is evaluating a potential new investment costing $400,000. The investment will be financed with $100.000 of debt and $300,000 of equity. The (unleveraged) after-tax cash flows, the CFATs, expected to result from the investment are $150,000 per year for four years. At that time the firm expects to be able to sell the project for a net after-tax $100,000 in cash. The debt financing will be four-year debt with interest payments of 14% per year on the remaining balance. Principal payments will be zero in year 1. $20,000 in year 2. $30.000 in year 3. and a final principal payment of $50,000 at the end of year 4. The net-benefit-to-leverage factor, T', is 0.20. The (unleveragedrequired return for the project is 20%. What is the project's net benefit to financial leverage? $6.386.70 56,746.11 $6.875.13 $6.951.49 Question 8 0/1 pts RQ 17.4 & 17.5. Zexxon, Inc. is evaluating a new project that will be financed with debt and equity. The cost will be CFATO - $400,000. The (unleveraged) after-tax cash flows (CFAT3) expected to result from the investment are $175,000 per year for 3 years. At that time Zexson expects to sell the project for a net after-tax value of zero. The debt financing will be 3-year debt with interest payments of $20,000 for all three years. The net-benefit-to-leverage factor, T', is 0.30. The (unleveraged required return for the project is 15%. Assume that is 10%. What is the present value of the net benfits to financial leverage? $14,92111 $15 322.49 $13,590.48 $15,426.58 Question 9 0/1 pts RQ 17.4 & 17.5. Shaker Corporation is evaluating a potential new investment costing $400,000. The investment will be financed with $100.000 of debt and $300,000 of equity. The (unleveraged) after-tax cash flows, the CFATs, expected to result from the investment are $150,000 per year for four years. At that time the firm expects to be able to sell the project for a net after-tax $100,000 in cash. The debt financing will be four-year debt with interest payments of 14% per year on the remaining balance. Principal payments will be zero in year 1. $20,000 in year 2, $30.000 in year 3, and a final principal payment of $50,000 at the end of year 4. The net-benefit-to-leverage factor, T', is 0.20. The (unleveraged) required return for the project is 20%. What is the project's present value of the CFAT including the sale of project? $436,535.49 $437,59051 $437,99867
