Question
question 58 ABC Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage
question 58
ABC Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 8%. The firm's tax rate is 40%. The CCA rate is 20% (Class 8).What is the present value of the depreciation tax shield?
Select one:
a. 293,130
b. $243,885
c. $277,177
d. $236,959
e. $286,000
question 61
A growth stock offers NO potential for capital gains.
question18
The market value of a firm that invests in projects providing a return less than its WACC should increase over time.
Select one:
True
False
question 64
A firm has a tax rate of 35%, an unlevered rate of return of 12%, total debt of $2,000, and an EBIT of $150.00. What is the unlevered value of the firm?
Select one:
a. $696
b. $1,161
c. $1,532
d. $813
e. $1,346
question 65
A firm is worth $1.500, has a 35% tax rate, total debt of $600, an unlevered return of 15%, and a cost of debt of 6.5%. What is the cost of equity?
Select one:
a. 18.68%
b. 18.41%
c. 20.20%
d. 19.14%
e. 16.67%
question 24
Your company is considering the purchase of a fleet of cars for $195,000. It can borrow at 9%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 34% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing?
Select one:
a. $7,771
b. $21,802
c. $15,363
d. $5,399
e. $6,594
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