Q3,7, 13

3) Which of the following statements is FALSE? A) In the final year of a project, the firm ultimately recovers the investment in net working capital. B) The firm deducts a fraction of the investments in plant, property, and equipment each year a: depreciation. C) When evaluating a capital budgeting decision, we generally include interest expense. D) The depreciation tax shield is the tax savings that results from the ability to deduct depreciation. Use the information for the question(s) below. Ford Motor Company is considering launching a new line of Plug-in Electric SUVs. The heavy advertising expenses associated with the new SUV launch would generate operating losses of $35 million next year. Without the new SUV, Ford expects to earn pre-tax income of $80 million from operations next year. Ford pays a 30% tax rate on its pre-tax income. 6) The amount that Ford Motor Company owe in taxes next year without the launch of the new SUV 6) is closest to: A) $13.5 million B) $24.0 million C) $31.5 million 30\%. taxes on pretax inc of sp8= =30%.808m=824m. D) $56.0 million 7) The amount that Ford Motor Company owe in taxes next year with the launch of the new SUV is 7) closest to: A) $31.5 million B) $24.0 million C) $13.5 million D) $56.0 million Use the following information to answer the question(s) below. ABC Corporation currently operates in 23 countries, with the previous year's global revenues at $3.6 billion. Recently, ABC. Corpotation Boards approved an initiative to expand into India. There is a probability that this expansion will change the company's risk profile. After -tax free cash flow to the firm on the India project for next three years is, respective $37 million, $39 million, and $42.5 million. ABC Corporation recently announced a dividend of $3.5 per share of stock. You are asked to evaluate ABC Corporation's planned financing of the required $80 million with a $60 million public offering of 10 -year debt in Germany and the remainder with an equity offering. India credit BB+ country risk premium: 3.21% Corporate tax rate: 35% 12) Your estimate of the ABC s cost of equity capital of its typical project (which will not alter risk 12) profile of the company) using the capital asset pricing model and of the ABC ' WACC prior to its investing in India project would be: A) 5.38%;5.5% B) 9.35%;9.5% Cost or E=ifr+. Eg. 2isk pum. = (C) 9.88%;9.5% D) None of the above =0.036+1.25.0.0562=9.88% WACC = debt/ (E+d)cos1 of D D +E)(E+d)cost of E=0.25/2250.1(12 13) Your estimate of the the asset beia of ABC Corporation prior to the India project which could serve 13) as a basis in estimation of the project's beta and project's cost of capital is closest to: A) 1.1132 B) 1.1561 C) 1.1658 D) None of the above