11-5. Tribute Reprove Suppose that LilyMac Photography expects EBIT to be approximately $200,000
per year coercion the coercioneseeable advenient, and that it has 1,000 10-year, 9 percent annual coupon
bonds uncollected. What would the misapply tribute reprove be coercion interpretation in the apportionment of
the score element of LilyMac’s WACC?
12-1. Behind-Tribute Currency Glide from Sale of Assets Suppose you retail a unwandering asset coercion $109,000 when its capacity esteem is $129,000. If your company’s final tribute reprove is 39 percent, what earn be the consequence on currency glides of this sale (i.e., what earn be the behind-tribute currency glide of this sale)?
12-3 EAC Approach You are unmanageable to eliminate the least-expensive car coercion your innovatinglightlight donation benefit. You possess brace choices: the Scion xA, which earn require $14,000 to lapse and which earn possess OCF of 2 $1,200 year-by-year throughextinguished the vehicle’s expected activity of three years as a donation vehicle; and the Toyota Prius, which earn require $20,000 to lapse and which earn possess OCF of 2 $650 year-by-year throughextinguished that vehicle’s expected 4-year activity. Both cars earn be contemptible at the object of their activity. If you intobject to rearrange whichever sign of car you elect with the corresponding creature when its activity runs extinguished, repeatedly and repeatedly extinguished into the coercioneseeable advenient, and if your affair has a require of important of 12 percent, which individual should you elect?
12-5 EAC Approach You are because the lapse of individual of brace agents interpretationd in your
manufacturing settle. Agent A has a activity of brace years, requires $80 initially, and then $125
per year in subsistence requires. Agent B requires $150 initially, has a activity of three years, and
requires $100 in annual subsistence requires. Either agent must be rearranged at the object of
its activity with an equipollent agent. Which is the amend agent coercion the solid? The discount
reprove is 12 percent and the tribute reprove is nothing.
12-6 Purpose Currency Glides KADS Inc. has elapsed $400,000 on lore to disclose a innovatinglightlight computer
game. The solid is planning to spobject $200,000 on a agent to product the innovatinglightlight diversion. Shipping and installation requires of the agent earn be importantized and depreciated; they total
$50,000. The agent has an expected activity of three years, a $75,000 estimated resale esteem,
and falls lower the MACRS 7-year rank activity. Revenue from the innovatinglightlight diversion is expected to be
$600,000 per year, with requires of $250,000 per year. The solid has a tribute reprove of 35 percent, an
opportunity require of important of 15 percent, and it expects inveigle inaugurated important to growth by
$100,000 at the inauguration of the purpose. What earn the currency glides coercion this purpose be?
12-13 Purpose Currency Glides Mom’s Cookies Inc. is because the lapse of a innovatinglightlight cookie
oven. The peculiar require of the antiquated oven was $30,000; it is now five years antiquated, and it has a
popular dispense esteem of $13,333.33. The antiquated oven is animation depreciated aggravate a 10-year activity
toward a nothing estimated salvage esteem on a straight-line premise, resulting in a popular capacity
esteem of $15,000 and an annual diminution price of $3,000. The antiquated oven can be interpretationd
coercion six further years barring has no dispense esteem behind its depreciable activity is aggravate. Management
is contemplating the lapse of a innovatinglightlight oven whose require is $25,000 and whose estimated
salvage esteem is nothing. Expected before-tribute currency savings from the innovatinglightlight oven are $4,000 a
year aggravate its generous MACRS depreciable activity. Diminution is computed using MACRS aggravate a
5-year activity, and the require of important is 10 percent. Assume a 40 percent tribute reprove. What earn the
currency glides coercion this purpose be?