Question 1:

You purchase a machine for $200,000 which belongs to 30% CCA class. What is the present value of the CCA tax shield on the machine if it is sold at the end of the fifth year for $50,000, your tax rate is 35%, and the appropriate discount rate is 10%

Question 2:

The accuracy of financial forecasts tends to decrease the further into the future the forecast.

Select one: (a) True or (b) False

Question 3:

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 $930000. The firm can lease it for $245000 a year, or it can borrow the money to purchase the equipment at 6%. The firm's tax rate is 34%. The CCA rate is 20%(Class 8). What is the present value of the depreciation tax shield?

Question 4:

Which of the following decision rules results in multiple answers for projects with nontraditional cash flows?

Select one:

(a) Internal rate of return, (b) Payback period, (c) Net present value, (d) Avg. Accounting return, (e) Discounted payback

Question 5:

The Johnson Company just paid an annual dividend of 1.60. How much would you be willing to pay for one share of Johnson company stock if the dividend remains constant and you require a 10% rate of return?

Question 6: Bond ratings issued by standard and poors specifically account for interest rate risk.

Select one: (a) True or (b) false

Question 6:

Given a tax rate of 15% for income up to $100000, a tax rate of 25% for income between $100000 and $150000, and a tax rate of 34% fro income above $150000, if ABC Inc. reports taxable income of $124000, then the....

Select one:

(a) Avg. tax rate is 20% (b) Avg. tax rate is 34% (c) marginal tax rate is 15% (d) marginal tax rate is 34% (e) marginal tax rate is 25%

Question 6:

To reflect the costs associated with a project accurately, the analysts should exclude erosion costs in the computation of operational cash flows.

Select one: (a) True or (b) False