Considering the tax consequences

Assignment Help Financial Management
Reference no: EM13969788

1. Timothy Clum is in the 25 percent tax bracket and is considering the tax consequences of investing $2,000 at the end of each year for 30 years, assuming the investment earns 8 percent annually.

If Timothy pays tax on the $2000 prior to each deposit into his investment, the value of his investment after 30 years will be $________.

Hint use this calculation-

FV of annuity = deposit amount * multiplier

2. What is the amount of earnings that Timothy gives up by not sheltering his investment from taxation as it grows? What is the difference between what he will earn by deferring taxes and what he will earn by paying taxes prior to deposit?


Once you have determined the correct answer to the future value of each investment scenario, calculate the difference between the two.

Reference no: EM13969788

What should be price of symantec stock today

Symantec does not currently pay a dividend, however, in 4 years you expect they will pay their first dividend and it will be $2 per share. The dividend is expected to grow at

What is the present value of the cash flows

The state lottery's million-dollar payout provides for $1.3 million to be paid in 20 installments of $65,000 per payment. The first $65,000 payment is made immediately, and th

Government bond with a yield

Two years ago, Mathew purchased a 10 year government bond with a yield of 4.75%. Today, the 23) interest rate on government bonds with 8 years to maturity is 3.5%. If Mathew s

Bond valuation example problem

Suppose that Diversified Technology has a B-rated bond with exactly 30 years until maturity, a face value of $1000 and a semiannual coupon rate of 6%. The yield to maturity on

Actions are likely to increase stock market efficiency

Evaluate whether the following actions are likely to increase stock market efficiency, decrease it, or leave it unchanged, and explain why. You are valuing an Indian company i

What is the companys cost of equity

Chandeliers Corp. has no debt but can borrow at 6.3 percent. The firm’s WACC is currently 8.1 percent, and the tax rate is 35 percent. What is the company’s cost of equity? If

Long-term financing needed-long-term debt

At year-end 2013, Wallace Landscaping’s total assets were $1.6 million and its accounts payable were $415,000. Sales, which in 2013 were $3.0 million, are expected to increase

What is the most you would pay per share

The dividend for Should I, Inc., is currently $1.30 per share. It is expected to grow at 16 percent next year and then decline linearly to a 4 percent perpetual rate beginning


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd