The compnay could depreciate the 30,000 over three years. how will the tax authoritydecision affect the NPV of this project. tax rate is 21%. opportinity cost of capital is 15%

Company beta is 2. it pays one half of earnings as cash dividends. Book value is per share is $50. book value will grow as they reinvest earnings. Roe and payput ratio stay constant for next 3 years. After that compettion forces ROE down to 11.5% and payout increases to 0.8. company is 100% financed by equity, market return is 9%, risk free rate is 4%, calculate the value of stock per share.(Hint: EPS=book equity*ROE quesion 2Ceo has a problem, company just ordered new euqipment and paid 400,000, 30,000 is described as installation cost. CEO needs to talk to tax authority to see if they can teat the 30,000 as tax deductabile expense or as capital investment. The compnay could depreciate the 30,000 over three years. how will the tax authoritydecision affect the NPV of this project. tax rate is 21%. opportinity cost of capital is 15%