1)Under MACRS, an asset which originally cost $100,000, incurred installation costs of $10,000, and has an estimated salvage value of $25,000, is being depreciated using a 5 year normal recovery period (20%, 32%, 19%, 12%, 12%, 5%). What is the depreciation expense in year 1?
2) MBI Inc. has experienced supernormal growth of 20 percent that should continue for the next 2 years. Growth will then be 15 percent in the 3rd year and 10 percent from then on. The last dividend paid was $0.75 per share and your required return is assumed to be 15 percent. According to the dividend model how much would you be willing to pay for the company?
3) When valuing a bond, the characteristics of the bond that remain fixed are all of the following EXCEPT the
A. Coupon Rate
C. Face Value
D. Interest Payment
4) Which of the following capital-budgeting decision criteria are correct?
a. Accept projects that have a positive NPV.
b. Accept projects that generate an IRR that is greater than the firm’s discount rate.
c. Accept projects that have a profitability index of greater than 1.0.
d. Accept projects that generate an MIRR that is greater than the firm’s discount rate.
e. All of the above are correct.
5) What does the term "firm value" refer to?
a. Common stockholders’ equity minus preferred stockholders’ equity
c. The market value of the firm’s outstanding debt and equity securities
d. Net book value
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