Q.2 XYZ will produce for 10 years and then liquidate itself; liquidation value =0; Assume that XYZ has annual revenue of 200, COGS and SG\&A(combined) =100; Book value of PP\&E =300 and PP\&E's useful life =10. IRS allows only a strait line depreciation . Tax rate =20%. Q.2.1 Assume discount rate of 10%. What is the "Value" of XYZ? Q.2.2. Now assume that IRS reclassifies XYZ's PP\&E as having 5 years of useful life only. Assume discount rate of 10%. What is the "Value" of XYZ now? Q.2.3 Assume that IRS classifies XYZ's asset as having a 15 years useful life and requires a straight line depreciation 2. Q.2.3.1 What is "Value" of XYZ at the outset of firm's operation? Q.2.3.2 After its free cash flows for Year 5 were paid out, calculate the "Market Value " of XYZ's, and the size of the deferred tax assets on XYZ's B/S?; the net book value of its PP\&E? ; Q.2.3.3 At the outset of Year 6 the tax rate was unexpectedly changed to 5\%. Now calculate - the "Market Value " of XYZ at the outset of Year 6; - the size of cash and of deferred taxes on B/S of XYZ's ? - the net book value of its PP\&E? Q.2 XYZ will produce for 10 years and then liquidate itself; liquidation value =0; Assume that XYZ has annual revenue of 200, COGS and SG\&A(combined) =100; Book value of PP\&E =300 and PP\&E's useful life =10. IRS allows only a strait line depreciation . Tax rate =20%. Q.2.1 Assume discount rate of 10%. What is the "Value" of XYZ? Q.2.2. Now assume that IRS reclassifies XYZ's PP\&E as having 5 years of useful life only. Assume discount rate of 10%. What is the "Value" of XYZ now? Q.2.3 Assume that IRS classifies XYZ's asset as having a 15 years useful life and requires a straight line depreciation 2. Q.2.3.1 What is "Value" of XYZ at the outset of firm's operation? Q.2.3.2 After its free cash flows for Year 5 were paid out, calculate the "Market Value " of XYZ's, and the size of the deferred tax assets on XYZ's B/S?; the net book value of its PP\&E? ; Q.2.3.3 At the outset of Year 6 the tax rate was unexpectedly changed to 5\%. Now calculate - the "Market Value " of XYZ at the outset of Year 6; - the size of cash and of deferred taxes on B/S of XYZ's ? - the net book value of its PP\&E