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Suppose a firm has a tax loss of $5million in the current period. The firm's after-tax discount rate is 10%. Over the preceding 5 years the firm has reported the following taxable income:
a. If the carryback period I 3 years, what is the firm's marginal explicit tax rate in the current period?
b. If the carryback period is 2 years, what is the firm's marginal explicit tax rate in the current period?
c. Suppose the carryback period is 2 years and taxable in period -1 was only $1 million. What is the firm's marginal explicit tax rate in the current period?
A. A carrybak period of 3 years means that the company would carry back all its current year loss to receive refunds for taxes paid last year to two years ago (the taxable incomes of the past two years are sufficient to cover the current year's loss).
To determine the company's explicit marginal tax ...
Compute the firm's explicit marginal tax rate given three scenarios
In what sense is the WACC an average cost?
Question 1: In what sense is the WACC an average cost? A marginal cost?
Question 2: A company's 6% coupon rate, semiannual payment, $100 par value bond that matures in 30 years sells at a price of $515.16. The company's federal-plus-state tax rate is 40%. What is the firm's component cost of debt for purposes of calculating the WACC? (hint: Base your answer on the minimal rate.) Please provide your solution with the steps. Financial calculator should be used.
Question 3: Explain why the NPV of a relatively long-term project, defined as one for which a high percentage of its cash flows are expected in the distant future, is more sensitive to changes in the cost of capital than is the NPV of a short-term project.
Question 4: A project has an initial cost of $52, 125, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 12%. What is the project's NPV?View Full Posting Details