1. If a firm produces a 12 percent return on assets and also a 12 percent return on equity, then the firm:
a. is using its assets as efficiently as possible.
b. has no net working capital.
c. has an equity multiplier of 2.
d. also has a current ratio of 10.
e. has no debt of any kind.
2. You purchase a machine for $200,000 which belongs in a 30% CCA class. What is the present value of the CCA tax shield on the machine if it is sold at the end of the sixth year for $24,000, your tax rate is 35%, and the appropriate discount rate is 10%?
a. $86,994
b. $40,143
c. $46,557
d. $52,215
e. $66,623