Floyd Manufacturing purchased an asset costing $65,000. Annual operating cash inflows are expected to be $12,000 each year for ten years. No salvage value is expected at the end of the asset's life. Assuming Floyd's cost of capital is 11 percent, what is the asset's net present value? (ignore income taxes)
A) $4,443
B) $5,670
C) $4,560
D) $17,670
B
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Accounting periods of greater than a year are called interim periods
Indicate whether the statement is true or false
NorthWest Water (NWW) Five years ago, NorthWest Water (NWW) issued $50,000,000 face value of 30-year bonds carrying a 14% (annual payment) coupon. NWW is now considering refunding these bonds. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market. A call premium of 14% would be required to retire the old bonds, and flotation costs on the new issue would amount to $3 million. NWW's marginal tax rate is 40%. The new bonds would be issued when the old bonds are called. Refer to the data for NorthWest Water (NWW). What will the after-tax annual interest savings for NWW be if the refunding takes place?
A. $664,050 B. $699,000 C. $768,900 D. $845,790 E. $930,369
Other things remaining equal, the price today and the growth rate are inversely related
Indicate whether the statement is true or false.
Your bank account pays a 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
A. The periodic rate of interest is 1.5% and the effective rate of interest is 3%. B. The periodic rate of interest is 6% and the effective rate of interest is greater than 6%. C. The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%. D. The periodic rate of interest is 3% and the effective rate of interest is 6%. E. The periodic rate of interest is 6% and the effective rate of interest is also 6%.