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7. Tony's Racing Engines, Inc. wants to replace a 10-year-old cylinder boring machine with a new machine that is more efficient. The old machine cost
7. Tony's Racing Engines, Inc. wants to replace a 10-year-old cylinder boring machine with a new machine that is more efficient. The old machine cost $35,000 when new and has a current book value of $7,500. TRE can sell the machine to a buyer for its current book value. TRE's tax rate is 34%. The effect of the sale of the old machine on the initial outlay for the new machine is a. ($7,500) b. ($10,050) c. ($4,950) d. $0 8. The risk-free rate of return is 2% and the investor's risk premium is 11%. Myrtle's Turtles, Inc. has a beta of 1.65 and a standard deviation of returns of 22%. Using the capital asset pricing model, what should the required rate of return be? a. 11.00% b. 13.00% c. 16.85% d. 20.15%
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