Question: 1. Whitestone Products is considering a new project whose data are shown below. The required equipment has a 4-year tax life, and the straight-line method
1. Whitestone Products is considering a new project whose data are shown below. The required equipment has a 4-year tax life, and the straight-line method is used for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected operating life. What is the project's Year 5 cash flow?
| Equipment cost (depreciable basis) | $70,000 |
| Sales revenues, each year | $42,500 |
| Operating costs (excl. deprec.) | $25,000 |
| Tax rate | 35.0% |
| a. | $13,850 | |
| b. | $13,190 | |
| c. | $17,500 | |
| d. | $11,375.00 | |
| e. | $15,003.45 |
2. $32.00 per share is the current price for Foster Farms' stock. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, r s, is 9.00%. What is the stock's current dividend today?
| a. | $1.352 | |
| b. | $38.83 | |
| c. | $1.0616 | |
| d. | $40.85 | |
| e. | $1.178 |
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