1).Elkhardt Corporation is making a $81,300 investment in equipment with a 5-year life. The company uses the straight-line method of depreciation and has a tax rate of 20 percent. The company’s required rate of return is 12 percent.
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What is the present value of the tax savings related to depreciation of the equipment? (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to 0 decimal place, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) IMPORTANT TO ROUND FINAL ANSWER AS IT IS INSTRUCTED
2).Martinez Hardy recently rejected a $23,600,000, five-year contract with the Vancouver Seals hockey team. The contract offer called for an immediate signing bonus of $8,850,000 and annual payments of $2,950,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $25,770,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.
Year 1 $2,950,000
Year 2 3,030,000
Year 3 3,110,000
Year 4 3,190,000
Year 5 3,460,000
Year 5 balloon payment 10,030,000
Total $25,770,000
Suppose you are Hardy’s agent and you wish to evaluate the two contracts using a required rate of return of 15 percent. In present value terms, how much better is the second contract? (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answers to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) IMPORTANT TO ROUND FINAL ANSWER AS IT IS INSTRUCTED
value of old contract ?
value of new contract?
is second contract better or not better?
THERES 3 MORE QUESTIONS ATTACHED IN FOLDER. OPEN AND DO THOSE AS WELL. PLEASE ALWAYS FOLLOW ROUND DECIMAL INSTRUCTIONS SINCE THIS METHOD COMPLETELY CHANGES THE FINAL ANSWER.
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