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One of your wealthy clients, Cecile, invests $100,000 for sole ownership of an electing S corporation's stock. The corporation is in the process of developing a new food product. Cecile anticipates that the new business will need approximately $200,000 in capital (other than trade payables) during the first two years of its operations before it starts to earn sufficient profits to pay a return on the shareholder's investment. The first $100,000 of this total is to come from Cecile's contributed capital. The remaining $100,000 of the funds will come from one of the following three sources:
-Have the corporation borrow the $100,000 from a local bank. Cecile is required to act as a guarantor for the loan.-Have the corporation borrow the $100,000 from the estate of Cecile's late husband. Cecil is the sole beneficiary of the estate.-Have Cecile lend the $100,000 to the corporation from her personal funds.The S corporation will pay interest at a rate acceptable to the IRS. During the first two years of operations, the corporation anticipates losing $125,000 before it begins to earn a profit. Your tax manager has asked you to evaluate the tax ramifications of each of the three financing alternatives. Prepare a memorandum to the tax manager outlinging the information your found in your reserach.
Should special restrictions, such as using the progressive corporate tax rates, apply to controlled groups of corporations? Is there an argument against such restrictions?
The Corporation is planning two different capital structures. Plan 1 would result in 2,000 shares of stock and $40,000 in debt and plan 2 would result in 4,000 shares of stock and $20,000 in debt. The interest rate is 10%.
Read the required Roy article. Respond to the following: a. How does the strategic planning of a multi-unit business organization pose constraints to its profitable growth? b. Why do banks lose profitability as they grow bigger?
On the other hand, the 3 month LIBOR rate 2 months ago (when the last cash exchange occurred) was 4.00% per annum with quarterly compounding.
The Lighting Store has sales of $364,000, depreciation of $28,000, and taxable income of $58,000. The capital intensity ratio is 1.2, the debt-equity ratio is 0.45, and the tax rate is 34 percent. What is the return on assets?
You must determine the intrinsic value of Tsetseko Technologies' stock. Tsetseko's end-of-year free cash flow (FCF) is expected to be $17.50 million, and it is expected to increase at a constant rate of 7 percent a year thereafter.
Computation par value of bonds and What is the bond's annual coupon interest rate
During the time you held the investment, it paid income equal to $1,000 each year. What is the four-year holding period yield that you earned on your investment?
Souza & Sons accepted a 9%, $22,000, 120-day note from one of its customers on july 22. On October 2, the company discounted the note at Cooperative Bank. The discount rate was 12%. What were (a) the bank discount and (b) the proceeds?
Identify importance of off balance sheet financing with respect to tax & accounting issues? How does EBIT or EPS analysis allow financial managers to find the capital structure of the firm?
Which project has the lowest standard deviation? Explain why standard deviation may not be an entirely appropriate measure of risk for pusrposes of this comparison.
Explain how budget planning is related risk management for the RFP you have selected.
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