Bank id 269630 type multiple choice correct texmex

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QUESTION:9[QUESTION BANK ID:269630]TYPE:MULTIPLE CHOICECORRECTTexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project’s NPV? (Hint:  Cash flows are constant in Years 1-3). WACC10.0%Pre-tax cash flow reduction for other products (cannibalization)$5,000Investment cost (depreciable basis)$80,000Straight-line deprec. rate33.333%Sales revenues, each year for 3 years$67,500Annual operating costs (excl. deprec.)$25,000Tax rate35.0%
<< HIDE ANSWERSA$3,636
B$3,828C$4,019D$4,220E$4,431
QUESTION:10[QUESTION BANK ID:269614]TYPE:MULTIPLE CHOICECORRECTSeveral years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $925 and the company’s tax rate is 40%.  What is the component cost of debt for use in the WACC calculation?  << HIDE ANSWERS
5.03%

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