FINANCE QUESTIONS

Diddy Corp. stock has a beta of 1.4, the current risk-free rate is 6 percent, and the expected return on the market is 15.00 percent. What is Diddy’s cost of equity? (Round your answer to 2 decimal places)

 

Suppose you sell a fixed asset for $113,000 when its book value is $133,000. 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?

 

     Your company is considering a new project that will require $794,000 of new equipment at the start of        the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book            value of $146,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm’s tax       rate is 30 percent. Estimate the present value of the tax benefits from depreciation. (Round your answer     to 2 decimal places)

 

 

 

Oberon, Inc., has a $35 million (face value) 10-year bond issue selling for 94 percent of par that pays an annual coupon of 8.20 percent. What would be Oberon’s before-tax component cost of debt? (Round your answer to 2 decimal places)

 

 

 

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