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Calvin is an 85 year old single taxpayer who is in the 39.6% federal income tax bracket. As part of his estate planning strategy, he gifted General Electric Corporation bonds to his 30 year old grandson, Casey, who is single and in the 25% federal income tax bracket. Calvin owned the bonds for 5 years and had a basis of $200,000 in the bonds. The bonds pay $5,000 of interest semiannually on March 1 and September 1. Calvin gifted the bonds to Casey on March 1, 2016, immediately after Calvin received the March 1, 2016 interest payment. On September 30, 2016, Casey sold the bonds for $210,000 and used the sales proceeds to buy his first home. What amount of family federal income tax savings is achieved in 2016 as a result of this gift? Please show your work and explain your calculations.
Compact fluroscent lamps (CFLs) have become popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.50 and lasts 1,000 hours. A Kilowatt-hour of electricity costs $.101, which is about nati..
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.00 million for land and $10.00 million for trucks..
Weston Industries has a debt–equity ratio of 1.8. Its WACC is 8.3 percent, and its cost of debt is 6.3 percent. The corporate tax rate is 35 percent. What is Weston's cost of equity capital? What would the cost of equity be if the debt-equity ratio w..
Deer and Doe purchased $100,000 of equipment six years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $24,500. What is the after-tax cash flow from this sale if the tax rate is 35 percent?
Three years from now, Barb will purchase a laptop that will cost 2,250. Assume that Barb can earn 6.25% (compounded monthly) on her money. How much should she set aside today for the purchase? Round off to the nearest $10.
Which one of the following sets of dividend payments best meets the definition of two-stage growth as it applies to the two-stage dividend growth model?
Your sister is considering to add one additional stock to a three stock portfolio, to form a four stock portfolio. The three stocks currently held all have b=1.0, and they are perfectly positively correlated with the market.
Hoosier Camper, Inc. is a manufacturer of truck campers. Its current line of truck campers are selling excellently. However, in order to cope with the foreseeable competition with other similar truck campers, HC spent $950,000 to develop a new line o..
A Stock will pay dividends at time t = 1 of $1.00. It is expected to grow at 10% as far as we can see into the future. If the appropriate discount rate for the risk of this stock is 15%, what should be the value of this stock, at t = 0? Note: The div..
Based on knowledge rate these ratios in terms of significance for: almost sick firms striving to fight off bankruptcy.
Buying a home is the biggest single investment or purchase that most individuals make. This project is designed to give you some insight into the home-buying process and the associated costs. Find all the costs associated with buying a home by making..
COMM Company is considering an investment in a new inventory control system. The system will require a substantial up-front investment but is expected to provide annual cash cost savings for the next 6 years. Prepare an exhibit that displays the outc..
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