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Rachel has been going over her tax lecture notes and is trying to understand the concept of liquidations. She has concluded a corporation is always required to recognize gains and losses on the distribution of property in a complete liquidation. Is she correct? Why or why not? Are there any exceptions which may apply? Josh liquidated his furniture business and distributed some of the assets to his half-brother, Sam. Can Josh take any losses on this transaction? Why or why not? Does liquidation unfairly penalize shareholders? Should shareholders be able to recoup their investment? Why or why not? Liquidations favor parent companies over subsidiaries. Why or why not? Some feel the bankruptcy laws favor corporations over individuals. Do you agree? Why or why not? Josh believes stock attribution rules impact liquidations by firms. Is he correct? Why or why not? Josh anticipates he will have substantial earnings this year and wants to lower his taxes. He decides to liquidate his business in order to take a loss. Is this ethical? Why or why not?
The YTM on a 10-year corporate bond is 11.6%. The real risk-free rate of interest is 3%. Inflation is expected to be a constant 4% for the foreseeable future. If the MRP is 0.1%(t - 1) and the liquidity premium is 0.5%, what is the default risk premi..
According to the Dividend Valuation Model for common stocks, what do you think woud happen if the Fed stopped purchasing government securities?
A 68 year old taxpayer has $20,000 in Social Security income and $100,000 in tax free municipal bond income, Does the municipal bond income affect the amount of social security the taxpayer must include in income?
Why does a change in the real interest rate shift the aggregate expenditure line in the 45°-line diagram, but not shift the IS curve?
You have been managing a $5 million portfolio that has a beta of 0.70 and a required rate of return of 11%. The current risk-free rate is 3.00%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.30, what wi..
Assume that Firms U and L are in the same risk class and that both have EBIT = $500,000. Firm U uses no debt financing, and its cost of equity is rsu = 14%. Firm L has $1 million of debt outstanding at a cost rd =8%.
When would the coefficient of variation be preferred over the standard deviation for comparing two risky stocks in isolation? Fully explain your answer.
How is the volatility of the underlying stock reflected in the binomial model?- Describe the three primary ways of incorporating dividends into the binomial model?
A project has an initial requirement of $205,484 for new equipment and $9,421 for net working capital. The installation costs to get the new equipment in working condition are 11,833. The annual operating cash flow is $80,574 and the cost of capital ..
Please describe the purpose of the Income Statement and the interrelationship between the income statement and the other major financial statements that we covered in this class. In your answer, please also address which financial statements should b..
Produce a projected capital budgeting cash flow statement for the Sneaker 2013 project. What is the project’s initial (year 0) investment outlay?
How do you describe Canadian dollar's Change against the U.S dollar? What is the actual change by percentage in the value of USD over this 5- year period?
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