Please Help!!!!! 16. Salvage Value. Quick Computing (fromproblem 5) installed it
ID: 2770832 • Letter: P
Question
Please Help!!!!! 16. Salvage Value. Quick Computing (fromproblem 5) installed its previous generation of computer chipmanufacturing equipment 3 years ago. Some of that older equipmentwill become unnecessary when the company goes into production ofits new product. The obsolete equipment, which originally cost $40million, has been depreciated straight-line over an assumed taxlife of 5 years, but it can be sold now for $18 million. The firm'stax rate is 35 percent. What is the after-tax cash flow from thesale of the equipment? 15. CAPM and Valuation. A share of stock witha beta of .75 now sells for $50. Investors expect the stockto pay a year-end dividend of $2. The T-bill rate is 4 percent, andthe market risk premium is 7 percent. If the stock is perceived tobe fairly priced today, what must be investors' expectation of theprice of the stock at the end of the year? Please Help!!!!! 16. Salvage Value. Quick Computing (fromproblem 5) installed its previous generation of computer chipmanufacturing equipment 3 years ago. Some of that older equipmentwill become unnecessary when the company goes into production ofits new product. The obsolete equipment, which originally cost $40million, has been depreciated straight-line over an assumed taxlife of 5 years, but it can be sold now for $18 million. The firm'stax rate is 35 percent. What is the after-tax cash flow from thesale of the equipment? 15. CAPM and Valuation. A share of stock witha beta of .75 now sells for $50. Investors expect the stockto pay a year-end dividend of $2. The T-bill rate is 4 percent, andthe market risk premium is 7 percent. If the stock is perceived tobe fairly priced today, what must be investors' expectation of theprice of the stock at the end of the year?Explanation / Answer
16. 18,000,000 - sale price 18,000,000 * 35 % Tax is 6,300,000. Cash flow after tax 18,000,000- 6,300,000 = 11,700,000