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1. If a security that matures in 91 days has a money market yield of 3.6%, what is the security's bond-equivalent yield?

2. What is the present value of an ordinary annuity of $271.29 per month for 12 years, evaluated at a nominal annual interest rate of 13.6 percent?

3. Kelly's Photos Now, Inc. currently has annual cash revenues of $500,000 and annual operating expenses of $325,000 including $75,000 in depreciation. The firm's marginal tax rate is 40 percent. New enhanced developing equipment can be purchased for $100,000. The equipment will not increase revenues, but will cut operating expenses by $4,000. The investment will increase depreciation by $1,500. Compute Kelly's annual incremental after-tax net cash flows.

a. $1,800

b. $2,500

c. $5,500

d. $3,000

e. None of the answers provided is correct

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92768867

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