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Compute NPV Depreciation using simplified straight-line method and cost of new preferred stock.

1. The Acu Punct Corp is considering the purchase of a new machine with an initial outlay of $4,500 and expected cash flows in year 1-4 of $2,200 per year. The risk-adjusted discount rate for the firm is 12% and the risk-free rate is 5%. Compute the net present value of this project.

2. A firm purchased an asset with a 5 year life for $90,000,and it cost $10,000 for shipping and installation. Using the simplified straight-line method, what is the annual depreciation?

3. X Corporation is trying to determine the appropriate cost of preferred stock to use in determining the firm's cost of capital. This firm's preferred stock is currently selling for $36, and pays a perpetual annual dividend of $2.60 per share. Underwriters of a new issue of preferred stock would charge $6 per share in flotation costs. The firm's tax rate 30%. Compute the cost of new preferred stock XYZ

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9161157

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