1. How does investment in a then-new product five years ago affect the value of the firm today?
2. The Schwab steel company is considering buying a wire soldiering machine, the machine has an initial cost of 200k$ costs 45k$ to ship the machine to the factory and 35k$ to set it up, as the new equipment is efficient the company is eligible for an 8% tax credit, what is the change in the firm’s cash flow from this investment.
3. Suppose you’re evaluating an asset that costs 20k$ that you expect to sell in 5 years, suppose further the tax basis of the asset for tax purposes will be 8k$ after five years and that the firm tax rate is 45%, if the firm expects to sell the asset for 15k$ in five years what are the expected cash flows from disposing this asset?