SETAL has an unlevered cost of equity equal to 11.5% and a tax rate of 16%. In years one, two, and three, the expected interest expenses are $142, $255, and $312, respectively. After Year 3, the interest expenses are forecasted to increase at a constant 4.5% each year. What is the horizon value of the interest tax shield?
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- (Ignore income taxes in this problem.) If an investment of $14,760 now will yield $18,000 at the end of one year, then the internal rate of return for this investment to the nearest whole percentage is: Select one: a. 14% b. 18% c. 22% d. 28%Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 a) 101.36 b) 46.37 c) 158.33 d) 82.85Assume that at the beginning of the year, you purchase an investment for $7,200 that pays $100 annual income. Also assume the investment's value has decreased to $6,800 by the end of the year. (a) What is the rate of return for this investment? (Input the amount as a positive value. Enter your answer as a percent rounded to 2 decimal places.) Rate of return % (b) Is the rate of return a positive or negative number? Positive O Negative
- Suppose that you can make an annual profit of $600 on an investment of $4000. Suppose you borrow the investment amount at an annual interest rate of 8%. Your updated expectation of inflation is 6%. Then your gross real returns (before loan payment) is _____ and your net real returns (after loan payment) is ______.The present worth of income from an investment that follows an arithmetic gradient was projected to be P 475,000. Ifthe income in year one is expected to be P 25,000, how much would the gradient have to be in each year through year 8 if the interest rate is 10% per year?Assume that at the beginning of the year, you purchase an investment for $6,300 that pays $130 annual income. Also assume the investment's value has increased to $6,900 by the end of the year. a. What is the rate of return for this investment? Note: Input the amount as a positive value. Enter your answer as a percent rounded to 2 decimal places. Rate of return % b. Is the rate of return a positive or a negative number? Positive Negative
- Suppose your principal investment is $1800 and you have a nominal interest rate of 6.5%. what is your nominal interest income? Presume you are taxed at the 22% tax rate, who much will you pay in taxes and what is your after tax nominal income? Presume inflation was 2.7% during the year, what is the loss of principal due to inflation? What is your real interest income? What is after-tax real interest income?Light company Intends to introduce a soft drink in the market in the next year. The projected revenues and expenses for the next five years are as follows: Year 1 2 3 4 Revenues 300M 200M 315M 420M Expenses 160M 50M 115M 200M The initial capital outlay is 500M which will be depreciated over the four-year period. The prevailing tax rate is 30%. What is the Accounting Rate of Return (ARR)? Select one: A. 14.7% B.21% C.25.5% D.None of the aboveA company forecasts free cash flow of $400 at Year 1 and $600at Year 2; after Year 2, the FCF grow at a constant rate of 5%.The company forecasts the tax savings from interest deductionsas $200 in Year 1, $100 in Year 2; after Year 2, the tax savingsgrow at a constant rate of 5%. The unlevered cost of equityis 9%. What is the horizon value of operations at Year 2?($15,750.0) What is the current unlevered value of operations?($14,128.4) What is the horizon value of the tax shield at Year 2?($2,625.0) What is the current value of the tax shield? ($2,477.1)What is the levered value of operations at Year 0? ($16,605.5)
- Assume that a farmer has $223,500 in Total Assets and $90,500 in Liabilities, faces 20% income tax rate, and 15% consumption rate. Further, assume that the interest rate is 10.5%. What is the rate-of-return on assets if the growth rate is 9.5%?To find the after-tax interest rate, the before tax interest rate is multiplied by If the current and expected future one-year interest rates are 5%, 6%, 7%, using the expectations theory of the term structure, the three-year interest rate is ___? If the current and expected future one-period interest rates are 5%, 6%, 7%, 5% and 5%, and the liquidity premium is 0.4%, the five-period interest rate is A steep yield curve indicates that interest rates are expected to future. in the An inverted yield curve may be due to a Federal Reserve policy of increasing short- term interest rates to fight what economic problem?A lot purchased for $4,500 is held for five years and sold for $13,500. The average annual property tax is $45 and may be accounted for at an interest rate of 12%. The income tax rate on the long term capital gain is 15% of the gain. What is the rate of return on the investment if the allowance for inflation is treated at an average annual rate of 7%?