What are the tax savings from depreciation? a. $5,000 b. $7,142.86 c. $8,333.33 d. $1,666.67 What is the after-tax terminal value? a. $180,000 b. $205,439.68 c. $216,032.97 d. $221,377.30 What is the nominal after-tax net return in year 6? a. $30,430.94 b. $35,000 c. $31,343.87 d. $28,684.08 Drew owns and operates an onion packing plant. To help reduce costs on labor and to increase efficiency, Drew is considering purchasing an automatic 50lb. bagging machine and a machine that automatically stacks the 50b. bags onto pallets. The cost of the two machines combined and their installation is $300,000. Drew will make a 20% down payment and finance the rest of the machinery with an amortized loan over 15 years at a 5.5% interest rate. Drew predicts that by using these two machines, his plant will be able to increase output, therefore increasing operating receipts by $30,000 per year. Also, this machinery will save him approximately $10,000 in labor costs each year by the increase in efficiency. However, other operating expenses such as electricity and insurance will increase by approximately $5,000 per year. Drew assumed a straight-line depreciation over 15 years and the life of the investment is 7 years. The real terminal value is $180,000 after the 7 years, and Drew requires a pretax 10% rate of return to capital. The marginal tax rate over the next 10 years is 25%, the rate of inflation is 3% and the risk premium is 1%..

1. What contributed to the increase in Caterpillar's earnings per share in 2014? attributed the
increased EPS to better performance in several areas of its business. Overall, however,
Caterpillar's revenues, operating profit, and net income all declined in 2014. rear of 2014 , the
CEO received a $2 million performance bonus. Questions 1. What effect do you think the
increase in treasury stock shares had on Caterpillar's EPS change in 2014? Explain. 2. Based on
the information above, what effect do you think the company's performance had on the CEO's
year-end bonus for 2014? Explain your answer. 3. What potential conflicts of interest can you
identify in the determination of the CEO's compensation package? How might these conflicts be
managed or eliminated?