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Chris wants to purchase manufacturing equipment from Owl LLC but he is a little short on cash and cannot get a loan from a bank. Owl LLC is willing to finance the purchase and the agreed that Chris will purchase the equipment for $350,000 (this is considered an installment sale). Chris will pay $50,000 down and $60,000 per year for the next five years plus interest (this is known as an instalment sale). The sale closed in 2014 and Chris paid the $50,000 per the agreement plus interest. No other principal was paid. Owl originally purchased the equipment on 4/12/2012 for $300,000 and it has an adjusted tax basis of $200,000. What will Owl recognize as a gain in 2014 and what is the character of the gain? Can you think of a better way to structure this transaction? Include an analysis of the research that you found to support your conclusion and cite your sources. Please be sure to use valid tax authority.
A firm recently purchased a new facility costing $984 thousand. The firm financed this purchase with an amortized loan at an interest rate of 8.8 percent APR, with monthly payments of $23.9 thousand. How long will it take to pay off this loan?
A colleague has evaluated projects using the firm's average discount rate, which is the discount rate on the average risk project of the firm. He produced the following report:
The ______ is used by financial managers for dissecting a firm's financial statements to assess it's financial condition. In general, firms that are subject to a high degree of ____, relatively short production cycles, or both, tend to use shorter pl..
May Industries has a bond outstanding that sells for $780. The bond has a coupon rate of 7.20 percent and 11 years until maturity. What is the yield to maturity of the bond?
Consider a 1-period binomial model with R=1.02, S0=100, u=1/d=1.05. Compute the value of a European call option on the stock with strike K=102. The stock does not pay dividends. Please submit your answer rounded to two decimal places.
We are evaluating a project that costs $800,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 60,000 units per year. Price per unit is $40, va..
The 3 month euro dollar futures price for a contract maturing in 6 years is quoted as 95.20. The standard deviation of the change in the short-term interest rate in 1 year is 1.1%. Estimate the forward LIBOR interest rate for the period between 6.00 ..
The determination of cash requirements is closely associated with a bank's liquidity requirements. Explain why.
assuming interest rates are 5 for aaa rated corporate bonds calculate the value of your bond relative to this interest
A company has just paid an annual dividend of $0.75 per share. If the dividends are expected to grow at a rate of 10% p.a. forever and PPT shareholders are known to demand a return of 15%, at what price should PPT shares sell?
the abc company has a large order for special uniforms to be used in an urgent operation. working the normal two shifts
Fooling Company has a 10.8 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $100. What is the yield to call (YTC) for this bond if the current price is 105 percent..
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