Strayer FIN100 week 6 Lab Assignment 5: Chapters 11 and 12

August 14th, 2017

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Question

value:
5.00 points

Oberon, Inc., has a $10 million (face value) 8-year bond issue selling for 96 percent of par that pays an annual coupon of 8.00 percent.

What would be Oberon’s before-tax component cost of debt? (Round your answer to 2 decimal places.)

value:
5.00 points

Suppose you sell a fixed asset for $128,000 when its book value is $148,000. If your company’s marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?

ATCF

value:
5.00 points

Diddy Corp. stock has a beta of 1.4, the current risk-free rate is 5 percent, and the expected return on the market is 14.00 percent.

What is Diddy’s cost of equity?

value:
5.00 points

Your company is considering a new project that will require $912,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $142,000 using straight-line depreciation. The cost of capital is 13 percent, and the firm’s tax rate is 34 percent.

Estimate the present value of the tax benefits from depreciation. (Round your answer to 2 decimal places.)

Present value

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Strayer FIN100 week 6 Lab Assignment 5: Chapters 11 and 12

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