Problem 9-07 A firm has earnings of $24,000 before interest, depceciation, and taxes. A new plece of equipment is installed at a cost of $10,000. The equipment wif be. depreciated over five vears, and the firm pays 15 percent of its earnings in taxes. What are the earnings and cash flows for the firm in vears 2 and 5 , using the two methods of depreciation? Use Exhibit 9.4 to answer the questions. Hound your answers to the nearest doltar, a. A \$1,000 bond has a 4.5 percent coupon and matures after nine years. If current interest rates are 8 percent, what should be the price of the band? Assume that the bond pays interest annually, Use. Appendix. B and Appendox D to answer the question. Round your answer to the nearest dollar, 5 b. If after four years interest rates are stall B percent, what should be the price of the bond? Use Appendix B and Appendix D to answer the cuestion. Assume that the bond pays interest annually. Round your answer to the nearest dollar. s. c. Even though interest rates did not change in a and b, why did the price of the bond change? The price of the bond with the longer term is 8 than the price of the bond with the shorter term as the investors will collect the 3 interest payments and receive the principal within a longer period of time d. Change the interest rate in a and b to 2 percent and rework your andwers. Assume that the bond pays interest annually. Round your answers to the nearest dollar. Price of the bond (nine vears to maturity) : s Price of the bond (five years to maturity): s Even though the interest rate is 2 percent in both calculations, why sre the bond prices different? The price of the bond with the longer term is 3 than the price of the bond with the shorter term as the investors will collect the 3 interest payments for a longer period of time