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The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $352,000 and expenses by $244,000. The project will require $153,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 9-year life of the project. The company has a marginal tax rate of 21 percent. What is the depreciation tax shield?

Upton Umbrellas has a cost of equity of 12.9 percent, the YTM on the company’s bonds is 5.4 percent, and the tax rate is 21 percent. The company’s bonds sell for 104.5 percent of par. The debt has a book value of $447,000 and total assets have a book value of $965,000. If the market-to-book ratio is 3.13 times, what is the company’s WACC?

Matterhorn Mountain Gear is evaluating two projects with the following cash flows: Year Project X Project Y 0 −$ 318,200 −$ 296,950 1 146,700 137,600 2 164,200 154,800 3 129,300 120,550 What interest rate will make the NPV for the projects equal?

The operating cycle will decrease when the:

The optimal amount of credit equates the incremental costs of carrying the increase in accounts receivable to the incremental:

What is the beta of a portfolio comprised of the following securities? Stock Amount Invested Security Beta A $ 4,100 1.46 B $ 5,100 1.57 C $ 7,600 1.00

Assume that RSF is a wholly owned subsidiary of the Rolled Steel Company. RSF provides credit financing solely for large ticket items purchased from the Rolled Steel Company. Which one of the following terms describes RSF?

A new project will require an initial investment of $250,000. Using the company’s required rate of return of 13 percent, the project’s NPV is $900. Should the project be accepted? Why or why not?

Cirice Corporation is considering opening a branch in another state. The operating cash flow will be $132,900 a year. The project will require new equipment costing $556,000 that would be depreciated on a straight-line basis to zero over the 6-year life of the project. The equipment will have a market value of$153,000 at the end of the project. The project requires an initial investment of $35,000 in net working capital, which will be recovered at the end of the project. The tax rate is 21 percent. What is the project’s IRR?

Which one of the following will increase a bid price?