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Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $520,000. Of this sum, $62,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible first-year deductible expense or as a capital investment. In the latter case, the company could depreciate the $62,000 using the five-year MACRS tax depreciation schedule. Assume the tax rate is 35% and the opportunity cost of capital is 7%. Calculate the value of the tax shield 1 and tax shield 2. (Note: Use Tax shield 1 as an expense treatment and tax shield 2 as 5 year MACRS.) (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
The bond pays a 7 percent coupon, has a YTM of 5 percent, and has 17 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a 5 percent coupon, has a YTM of 7 percent, and also has 17 years to maturity.
A final suggestion is a make a 10% across-the-board price reduction. By how much would dollar sales have to increase to maintain Alliance's current contribution.
Assume the Federal Reserve Bank of US unexpectedly raises interest rates in US. How do you think this will impact foreign-exchange market?
Suppose a bond with three years until maturity and an 8.5 percent annual coupon sells for $1,029. What is the interest rate for three years?
The borrower repaid euros at loan maturity and when the loan was repaid the exchange rate was 1.98 francs per dollar. What was the bank's franc rate of return? -2.82% 9.94% 5.71% 7.75% 11.04%
What are the advantages and disadvantages of issuing both types of shares? Which type of shares would you decide to issue and why? What affect would the new issuance have on the financial statements?
The current average selling value for a home in Canada is $275,000. If the current price is 7 2/3 percent lower than last year, determine last year's average price?
Explain What action should the company president take and should the order be accepted if the Executive Division plans on selling the desks in the outside market for $420
How are compounding and discounting related? Explain time value of money.
If Hudson Corporation borrows $500,000 on a 10% add-on basis, payable in twelve equal end-of-month installments, how large would the monthly payments be?
Suppose you have decided to buy a diversified open-end mutual fund investing in U.S. common stocks. Because there are thousands of these funds available,
The Florida lottery agrees to pay the winner $244,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.09?
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