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My issue is understanding the process and could use as much explanation as possible. Suppose you are advising a college basketball coach on whether to organize his summer basketball camps for high school students as a C corporation versus an S corporation. The taxpayer plans to operate the camps for 5 years, then wind up the corporation by simply paying any retained earnings as a dividend in the final year. The taxpayer faces a marginal tax rate of 35% and the corporate tax rate is a flat rate of 35%. The expected pretax rate of return on the camps is 12% per year (before any compensation or dividends to the taxpayer). a. Assuming zero dividends are paid each year, which corporate form would you advise the taxpayer to select? b. Assuming 50% of taxable income is distributed each year as dividends, which form would you advise the taxpayer to select? Explain your answer in words (no algebra is required here). c. Again assuming a zero dividend payout each year, what shareholder-level tax rate, ts, in the C corporation form would equate the after-tax return to the taxpayer in both corporate forms? d. Explain, in words, how it might be possible to lower the shareholder-level tax to the required rate in part (c) such that the after-tax rate of return to the taxpayer is the same in both corporate forms.
Create a decision tree for decision situation explained in problem 25 and indicate the best decision
a corporation has decided to replace an existing asset with a newer model. the new asset will cost 70000. the original
The Shocking Demise of Mr. Thorndike, Prepare a PowerPoint presentation to be presented in class (blackboard) and an Excel worksheet backup that address the case study question(s) and provides:
a portfolio of derivatives on a stock has a delta of 2400 and a gamma of -100. an option on the stock with a delta of
On the Milan boards, Fiat stock closed at EUR5.84 per share on Thursday, March 3, 2005. Fiat trades as an ADR on the NYSE. One underlying Fiat share equals one ADR.
Using this informtion above, what is the pre-tax cost of debt for the newly-issued bonds? Also, what is the relevant cost of the new bonds for capital budgeting?
Cassandra sells property for a sales valueof $150,000. In addition, Lana, the buyer, pays $5,000 in property taxes that had accrued during th year while property was still legally owned through Cassandra.
The project requires an initial investment in net working capital of $285,000 and the fixed asset will have a market value of $225,000 at the end of the project.
Jiminy's Cricket Farm issued a 30-year, 9.8 percent semiannual bond 5 years ago. The bond currently sells for 87 percent of its face value. The company's tax rate is 40 percent.
You have just won $120,000 from a contest. If you invest the whole $120,000 in a tax-free money market fund earning 6% compounded weekly, how long do you have to wait to become a millionaire? Round to 2 decimal places.
Computation of gain or loss on sale of investments and Journal entries to record purchase & sale of company's Common & Treasury stocks
discuss why options and warrants may be considered potentially dilutive common shares for the computation of diluted
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