Question
Q1: Q2: Q3: CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $4 million, which
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Q3:
CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $4 million, which will be depreciated by straight-line depreciation over five years. In addition, there will be $5 million spent on promoting the new candy line. It is expected that the range of candies will bring in revenues of $6 million per year for five years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 35%, what are the incremental earnings in the second year of this project?
Q4:
The Sisyphean Company is considering a new project that will have an annual depreciation expense of $3 million. If Sisyphean's marginal corporate tax rate is 40% and its average corporate tax rate is 30%, then what is the value of the depreciation tax shield on thecompany's new project?
The following show four mutually exclusive investments. Which is the best investment? A. Initial investment $1.1 million; Cash flow in year 1: $160,000. Annual Growth Rate: 2%, Cost of Capital: 93% O B. Initial investment $1.2 million; Cash flow in year 1: $150,000; Annual Growth Rate: 296, Cost of Capital: 7.1% C. Initial investment $1.3 million; Cash flow in year 1: $160,000, Annual Growth Rate: 196; Cost of Capital: 5,8% O D. Initial investment $1.4 million; Cash flow in year 1: $150,000, Annual Growth Rate: 2%; Cost of Capital 81%
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