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Sara owns 160 acres of farmland worth $800,000. She inherited the land from her father 30 years ago when it was worth $200,000. Her married son would like to buy the land, but has limited funds. He proposes buying the land on a contract for deed, paying $50,000 down and the balance over 20 years at 4% interest. Assume that if Sara sold the land for cash, her tax rate on the gain would be 23.8%, but if she sold it on a contract her rate would be 15% on the gain and 28% on the interest income on each payment. Advise Sara on how much tax she would have to pay under each option (selling for cash or on the contract, also assume Sara could earn 4% interest if she sold for cash and invested the money)
The Cracker Barrel has a beta of 0.98, a dividend growth rate of 3.2 percent, a stock price of $33 a share, and an expected annual dividend of $1.06 per share next year. The market rate of return is 11.2 percent and the risk-free rate is 3.7 percent...
Consider a 10-year, 12 percent annual coupon bond with a required return of 8 percent. The bond has a face value of $1,000. Which of the following is correct?
An analyst believes that a stock for a large company has a beta of 1.4. The 10 year government bond rate is 4%, and the analyst expects the return on the S&P500 to be 12%. Using the capital asset pricing model, the analyst would estimate the required..
Calculating Future Values [LO1] For each of the following, compute the future value:
Show that the borrower’s periodic outlay for a standard sinking fund method repayment at rate j is larger than the level outlay under amortization method with the interest rate i, if i > j.
Prepare the business Income Statement for the period. Prepare the Statement of Changes in Equity for the period. Prepare the classified Balance Sheet at the end of the period.
Fill in the missing numbers for the following income statement. (Input all amounts as positive values. Do not round intermediate calculations.) Sales $ 676,900 Costs 431,800 Depreciation 104,400 EBIT $ Taxes (35%) Net income $ Calculate the OCF. OCF ..
Describe the dividend theories: dividend irrelevance, dividend preference, tax effect theory, clientele effect, and signaling hypothesis. Please choose one of these concepts and discuss it in a minimum of three sentences.
You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –25.8 percent, 14.2 percent, 31.4 percent, 2.6 percent, and 21.6 percent. The average inflation rate over this period was 3.26 percent and the average T-b..
Calculate with explanation the unit costs of the souvenirs. You should state your assumption and determine the price of the souvenirs and explain any other information that might be relevant for deciding the price
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 $11.80 million. This investment will consist of $2.70 million for land and $9.10 million for trucks ..
A six month $47,000 Treasury bill with a discount rate of 3.717% was sold in 2009. Find the Price of the Bill. Actual interest rate paid by treasury.
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