Carter Corporation has some money to invest, and its treasurer is choosing between City of Chicago municipal bonds and U.S. Treasury bonds. Both have the same maturity, and they are equally risky and liquid. If Treasury bonds yield 6.40%, and Carter's marginal income tax rate is 25.00%, what yield on the Chicago municipal bonds would make Carter's treasurer indifferent between the two?
a. 5.12% b. 8.00% c. 4.80% d. 3.66% e. 8.53%
In 2020, Uniontown Books had EBIT equal to -$1,200,000. In 2021, its EBIT was $1,800,000.
The company has no debt, and therefore, pays no interest expense. Its corporate tax rate is 25%. What was Uniontowns tax liability for 2021? (Assume that the company takes full advantage of the carry-forward provision.)
Herring Corporation has operating income of $265,000 and a 25% tax rate. The firm has short-term debt of $110,000, long-term debt of $349,000, and common equity of $459,000. What is its return on invested capital?
Warr Company is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC or negative, in both cases it will be rejected.
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flows | -$1,540 | $425 | $425 | $425 | $425 |
