1. Baldwin Co. purchases an asset for $50,000. This asset qualifies as a five-year recovery asset under...

Question:

1. Baldwin Co. purchases an asset for $50,000. This asset qualifies as a five-year recovery asset under MACRS, with the fixed depreciation percentages as follows:
Year 1 = 20.00%
Year 2 = 32.00%
Year 3 = 19.20%
Year 4 = 11.52%
Baldwin has a tax rate of 35%. If the asset is sold at the end of four years for $5,000, what is the after-tax cash flow from disposal?
2. The following market information was gathered for the Blender Corporation. The firm has 1,000 bonds outstanding, each selling for $1,100.00 with a required rate of return of 8.00%. Blenders have 5,000 shares of preferred stock outstanding, selling for $40.00 per share and 50,000 shares of outstanding, selling for $18.00 per share. If the preferred stock has a required rate of return of 11.00% and the requires a 14.00% return, and the firm has a corporate tax rate of 30%, then calculate the firm's WACC adjusted for taxes.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...