1. Fundamental bond analysis would lead an investor to
(a) buy a bond before a rating upgrade.
(b) sell a bond before a rating upgrade.
(c) use a passive policy since the market is efficient.
(d) buy a bond before a rating downgrade.
(e) ignore bond ratings.
2. Summer Tyme, Inc., is considering a new 5-year expansion project that requires an initial fixed asset investment of $4.536 million. The fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. The project is estimated to generate $4,032,000 in annual sales, with costs of $1,612,800.
Required:
If the tax rate is 32 percent, what is the OCF for this project?
Options:
$1,935,360
$2,032,128
$2,419,200
$1,838,592
$1,028,160