Compuvac Company has just completed its first pass forecast using the projected balance sheet method.The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon.Additionally,the firm will sell 500,000 shares of new common equity at $18.10 per share.Next year's expected dividend is $0.48 per share.The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate.Given this information,what is the incremental change in AFN for Compuvac going from the first pass to the second pass?
A) $240,000
B) $0
C) $480,000
D) $160,000
E) $640,000

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The Answer of Compuvac Company has just completed its first pass forecast using the projected balance sheet method.The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon.Additionally,the firm will sell 500,000 shares of new common equity at $18.10 per share.Next year's expected dividend is $0.48 per share.The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate.Given this information,what is the incremental change in AFN for Compuvac going from the first pass to the second pass?
A) $240,000
B) $0
C) $480,000
D) $160,000
E) $640,000

Compuvac Company Has Just Completed Its First Pass Forecast Using