1. The 3-year MACRS depreciation allowances are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. What is the depreciation expense in year 2 for an asset with an initial cost of $87,000?
2. A stock paid $2.64 in dividends at the end of last year and is expected to pay a cash dividend until infinity. Each year the dividends are expected to grow by 6.6%. Investors require a 9% rate of return. What is value of the common stock?
3. Larry is starting his retirement fund by investing $12,000 into an IRA today. He plans to invest $12,000 a year for the next 25 years. If the IRA can earn 6.5% annual interest, about how much will be in Larry's IRA at the end of 25 years?
$300,000
$1,010,730
$829,882
$752,584