Financial_leverage

Question 1- A $12,000 investment will return annual benefit for six yearswith no salvage value at the end of six years. Assumestraight line depreciation and a 46% tax rate and the inflationrate is 5%. What is the inflation free after tax rate ofreturn on the investment if the annual benefits are $2,918 intoday’s dollars? a. 10.18% b. 4.94% c. 5% d. 8.20%

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HOMEWORK-DEPRECIATION/TAXES Initial cost $400,000 $160,000 $30,000 Annual Revenue Annual Expense Recovery Period (expected life) 5 Tax Rate 30% MARR 12% 6. Construct a complete Income Statement using SL 7. Construct an Income Statement using MACRS.

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ements What is the total Wealth Accumulation of the following investment assuming the available after tax reinvestment rate is 5%? IRR 10.70% O $4,690,000 O $4,821,078 O $4,848,844 $4,905.989 n 0 $ 1 S 2 $ 3 $ AS 5 $ Investment $ (3,000,000) 240,000 250,000 260,000 266,000 3,674,000

Georgetown                                        Berbice Income before tax.                                  20,000                                               75,000Required rate of return.                            12%                                                     12%Investment                                              100,000                                             500,000 Calculate the residual income for Georgetown a. 1,500 b. 150,000 c.  15,000 d. 8,000

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What is the fair value of an investment that pays $100 per year in year 1, grows at the rate of 3% and has an 8% required rate of return? A. $2,000. B. $1,250. C. $909.09 D. $1,287.50

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11. Before Tax Cash Flow = $40,000; Annual Loan Payment = $5,280 (based on a 20-year, $75,000 loan at 3.5% per year); Current Year Loan Interest = $1,663; Depreciation = $10,000; Tax Rate = 34%. The After Tax Cash Flow for the current year is closest to... a) $29,385 b) $23,422 c) $13,422 d) $15,085 e) $18,702 $25,085 g) $3,423 h) $1,760

Discount rate: 6% End of year: 1 2 4 Cash flows: (20,000) $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 What is the Net Present Value of the cash flows? At what discount rate is the Net Present Value "0"? Initial outlay: 5,000 Life of investment in years: 10 Amount to be received at end: 10,000 8 Rate of return: Amount of loan: 2$ 50,000 Annual payment: 2$ 10,000 Interest rate: 8% 9. How many years will it take to pay off the loan? 3. %24 %24 %24 %24

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H1. Account I would need to calculate with the following information provided. This is all that was provided to me. COGS: 68% - SGA: 13% - R&D: 2% - Depreciation, Interest expenses are fixed as stated. Tax rate is 19%   ***Please do provide a step by step calculations and explanation***

Assuming the reinvestment rate is 5%, in order for the Annual Compound Growth Rate of Capital to equal the Internal Rate of Return, which of the following statements is correct? IRR= n 0 1 2 3 4 $ 5 $ es is is is i $ $ $ $ Investment $ (1,000,000) 80,000 83,333 86,667 88,667 1,224,667 10.70% The after tax reinvestment rate would have to be higher than the IRR The after tax reinvestment rate would have to be lower than the IRR There is not enough information to answer this question The after tax reinvestment rate would have to be equal to the IRR

8. Assuming you require a 15% rate of return, what will the net present value be? Initial Investment 3 4 6 Year Cash Flow 9 700 1 530 1600 4 150 5 550 2 080 before tax Cash Flow 7 000 1 100 1 200 3 000 4 000 1 500 after tax A) R-358.57 B) R-223.68 C) R-130.78 D) R-228.05 9. A loan of R1.75 million was made to a farmer, bonded against fixed property at an interest rate of 7.25% per year compounded quarterly. The farmer agreed to pay off the loan in equal quarterly instalments over a period of 15 years. What are the equal quarterly payments the farmer needs to make? A) R29 167 B) R48 085 C) R134 292 D) None of the above 10.A loan of R1.75 million was made to a farmer, bonded against fixed property at an interest rate of 7.25% per year compounded quarterly. The farmer agreed to pay off the loan in equal quarterly instalments over a period of 15 years. What is the remaining capital the farmer still needs to pay at the end of the fourth year? A) R1 682 735 B) R1 610 459 C) R1 449 353 D)…

Calculate the Payback Period using the following Information All figures are in OMR Initial Investment = 10000   Cash Flow after Tax(CFAT) are as follows : Year 1 : 5000   Year 2 : 3000 Year 3 : 2000 Year 4 :  3000 Year 5 : 50000     2.5 Years  3 Years 3 Years and 10 months 3 Years and 2 months

The following details are available for Gamma Ltd:    Details  Proposal A  Proposal B  Initial Cost  Rs.10,00,000  Rs. 12,00,000  Expected life  4 years  5 years  Profits before tax after depreciation  Rs. 3,00,000 each for first two years  Rs. 3,50,000 each for next two years  Rs. 3,00,000 each for first two years  Rs. 3,50,000 each for next three years    Calculate Discounted Payback period and suggest which one is better if the discounting factor is 10% and tax rate 30%. Show in detail relevant calculations and use Straight Line Method of Depreciation

Rental Costs Buying Costs Annual mortgage payments Property taxes Insurance/maintenance $8,270 205 $10,320 ($9,628 is interest) 2,480 1,910 4,500 Annual rent Insurance Security deposit 1,540 Down payment/closing costs Growth in equity Estimated annual appreciation 692 2,500 Assume an after-tax savings interest rate of 5 percent and a tax rate of 28 percent. (a) Calculate the total rental cost and total buying cost. (Round your intermediate calculations and final answers to the nearest whole number.) Total Cost Rental cost Buying cost (b) Based on the cost criteria, would you recommend buying or renting? Renting Buying

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