12)Carbondale Oil announces that a well that it has sunk in a new oil province has shown the existence of substantial oil reserves. The exploitation of these reserves is expected to increase Carbondale's free cash flow by $100 million per year for eight years. If investors had not been expecting this news, what is the most likely effect on Carbondale's stock price upon the announcement, given that Carbondale has 60million shares outstanding, no debt, and an equity cost of capital of 11%?

A. rise by $6.86

B.no effect

C .rise by $10.29

D. rise by 8.58

13)

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
MACRS Depreciation Rate	20.00%	32.00%	19.20%	11.52%	11.52%	5.76%

A bakery invests $36,000 in a light delivery truck. This was depreciated using the five-year MACRS schedule shown above. If the company sold it immediately after the end of year 2 for $20,000, what would be the after-tax cash flow from the sale of this asset, given a tax rate of 20%?

A.$9,632

B.$1,926

C.$10,368

D.$18,074

14)

Shepard Industries is evaluating a proposal to expand its current distribution facilities. Management has projected the project will produce the following cash flows for the first two years (in millions).

Year	1	2
Revenues	1,050	1,350
Operating expense	450	500
Depreciation	220	260
Increase in working capital	40	70
Capital expenditures	270	320
Marginal corporate tax rate	20%	20%

The depreciation tax shield for Shepard Industries project in year 2 is closest to:

A.$ 52

B.$ 44

C.$ 62

D.$ 78