Just three quick multiple choice finance questions i'm not coming up with the correct answers-
1. Consider an asset that costs $783,200 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $139,000.
If the relevant tax rate is 30 percent, what is the after tax cash flow from the sale of this asset?
$97,300 (not the correct answer)
$92,590 (not the correct answer)
2. Consider the following information on large-company stocks for a period of years.
Series Arithmetic Mean
Large-company stocks 12.90 %
Small-company stocks 17.00
Long-term corporate bonds 6.80
Long-term government bonds 6.70
Intermediate-term government bonds 6.20
U.S. Treasury bills 4.40
(a) What was the arithmetic average annual return in nominal terms?
12.90% (I think this is the correct answer)
(b) What was the arithmetic average annual return in real terms?
17.08% (not the correct answer)
NOTE: I used the Fisher equation to solve this question and didn't come up with the right answer.
Fisher equation: 1 + R = (1+r) x (1+h)
When i plugged everything in I got an answer of 17.80% and that is not correct.
3. You purchased a zero-coupon bond one year ago for $275.83. The market interest rate is now 9 percent.
If the bond had 15 years to maturity when you originally purchased it, what was your total return for the past year?
9.00% (not the correct answer)
*please help explain these tree questions- also please SHOW ALL WORK so I fully understand how to solve the problem.
Let me know if you have any questions, I'll be online.. Thanks you!
Attached Excel file... View the full answer