User Account

All Pages

What will be the value for before-tax profit

Assignment Help Finance Basics
Reference no: EM131758023

Al Simpson helped start Excel Systems in 2010. At the time, he purchased 110,000 shares of stock at $1 per share. In 2015, he has the opportunity to sell his interest in the company to Folsom Corporation for $50 a share in cash. His capital gains tax rate would be 15%.

a. If he sells his interest, what will be the value for before-tax profit, taxes and after tax profit?

b. Assume, instead of cash, he accepts Folsom Corporation stock valued at $50 per share. He pays no tax at that time. He holds the stock for five years and then sells it for $82.50. (assume no cash dividends). What will be the value for before-tax profit, taxes and after tax profit in 2020? His capital gains tax is once again 15%.

c. What is the present value (year 2015) of the after-tax profit computed in b? Use 7% discount rate. 

d. Which option should Al select in 2015?

Reference no: EM131758023

Questions Cloud

What effect does the elephant have on the correlation : All brawn? The figure below plots the average brain weight in grams versus average body weight in kilograms for 96 species of mammals.
Compute the expected value of the return : Compute the expected value of the return on the investment. Assume the time period involved is short.
Analyzing internal and external factors contributing : Using a three scholarly sources in addition to the textbook, analyzing internal and external factors contributing to an individual's resistance to change.
Discuss employers payroll taxes on the payroll : December 30, to record the employer's payroll taxes on the payroll to be paid on December 31
What will be the value for before-tax profit : a. If he sells his interest, what will be the value for before-tax profit, taxes and after tax profit?
How would the correlation change : If heights were measured in centimeters rather than inches, how would the correlation change? (There are 2.54 centimeters in an inch.)
Financial data for noble corporation : Assume the following financial data for Noble Corporation and Barnes Enterprises:
The major advantage of receiving monthly bank statements : The major advantage of receiving monthly bank statements
Rembrandt paint company and picasso art supplies : Assume the following financial data for Rembrandt Paint Company and Picasso Art Supplies:

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd