1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Paha777 [63]
3 years ago
11

Elizabeth, an individual taxpayer, has a marginal tax rate on ordinary income of 32% and a tax rate on long-term capital gains o

f 15%. She has $100,000 that she wants to invest for the next 6 months, at which time she will liquidate the investment. She is considering three investment alternatives: (1) a corporate bond yielding an annual interest rate of 5%; (2) a municipal bond that pays and annual interest rate of 3%; (3) stock that will pay a dividend of $1000 and is expected to increase in value by 2% per year. Assume that Elizabeth can purchase the stock after the declaration date but before the record date, and that all interest and dividends will be received at the end of the 6 month period. Which investment alternative should Elizabeth choose? Please show your calculations.
a. After-tax return for corporate bond_____________.
b. After-tax return for municipal bond___________.
c. After-tax return for stock__________
d. Which investment should Elizabeth choose?____________.
Business
1 answer:
DerKrebs [107]3 years ago
5 0

Answer:

a. After-tax return for corporate bond $1,700.

b. After-tax return for municipal bond = $1,500.

c. After-tax return for Stock = $1,320

d. Which investment should Elizabeth choose?Corporate Bonds .

Explanation:

The question is to calculate a few figures and the steps are detailed below

1)The After tax Return for the Corporate Bond

Interest and dividend is received at the end of 6 months period

Therefore: The interest = 6/12 x 100,000 x 5%) = $2,500

Secondly subtract tax from the interest= 32% of $2,500 = 800

therefore, Interest after tax = $2,500-$800 = $1.700

2)Calculate the After tax return on Municipal bonds

First, the interest on the municipal bonds =

6/12 x $100,000 x 3% = $1,500

Since municipal bonds interests are tax exempt. The amount remains

3) Determine the after tax return on stock

First, the dividend = $1,000 subtract tax (0.32 x 1,000)

= $1,000-$320 = $680

Secondly, since the capital appreciation on the stock is to be computed as follows:

6/12 x $100,000 x 2% = $1,000

subtract tax (0.32 x 1,000)

= $1,000-$320 = $680 (this is the net appreciation)

This means that net tax return on stock is 680 + 680 = $1,320

This is based on the assumption of stock sales at the end of the 6th month leading to the use of a marginal tax rate.

D) Elizabeth would be advised to invest in the asset with the highest after tax return which is the corporate bond

You might be interested in
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $890,000. John has us
Phantasy [73]

Answer:

$763,057

Explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1-6 =  $89,000

Cash flow in year 7 = 79,000

Cash flow in year 8 = 69,000

Cash flow in year 9=  59,000

Cash flow in year 10 =  49,000 +  $790,000 = 839,000

I = 11%

Present value = $763,057

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

8 0
3 years ago
some nations make manufacturers responsible for reducing e-waste. companies must recover used and discarded electronic equipment
Anon25 [30]

It is a very good idea if a nations make manufacturers responsible for reducing e-waste, companies must recover used and discarded electronic equipment that they sell to customers.

<h3>What is e-waste?</h3>

Electronic items that are nearing the end of their "useful life" are sometimes referred to as "e-waste." Common electronic products include computers, televisions, VCRs, stereos, copiers, and fax machines. Numerous of these items can be recycled, repaired, or reused. Electronic garbage, sometimes known as e-waste, refers to outdated electrical or electronic equipment. E-waste includes used electronics that are intended for recycling through material recovery, refurbishment, reuse, resale, or disposal. Because the parts used to build gadgets like laptops, cell phones, and televisions include metals and compounds known to be harmful to human health, e-waste is dangerous. Children frequently work, reside, and play in or close to e-waste recycling facilities, making them particularly susceptible to the effects of e-waste.

To learn more about e-waste click,

brainly.com/question/15549433

#SPJ4

7 0
1 year ago
Anna is choosing a bank and a checking account. She would be well-advised to consider her personal needs and values in the analy
zubka84 [21]

It is TRUE that Anna would be well-advised to consider her personal needs and values in the analysis, not only the bank’s features when she’s choosing a bank and a checking account.

 

Opening a checking account might seem like a simple task. You just walk into a bank near your home or office, fill out an application, hand over a deposit and you're all set, right?


Not quite.


<span>While it is often that easy to open an account, it's not always that easy to choose a checking account. That's because banks, credit unions and other financial companies offer a wide range of checking accounts with different features and fees. Unless your banking needs are unusually basic, you should do some research and shop around for an account that's right for you.</span>

 

I am hoping that this answer has satisfied your query and it will be able to help you in your endeavor, and if you would like, feel free to ask another question.

5 0
3 years ago
Read 2 more answers
When might adding an additional employee be bad for a small business?
Anarel [89]

Answer:

If the demand for the product or services goes down

Explanation:

A reduction in demand for a good or service results in a decline in its price. As per the law of supply and demand, a decline in demand while holding other factors constant pushing the equilibrium price down. Reduced prices mean that the revenues obtained from the sales of the product or service will decline.

Hiring an extra worker when the demand is low will lead to losses. Low demand causes low prices, which implies that the cost of the new employee will be greater than the benefits obtained from the worker.  A reduction in prices will mean that the marginal product of labor will be lower than the cost of labor.

3 0
2 years ago
An office building is expected to create operating cash flows of $30,500 a year for three years, based on tenants' rental income
Tasya [4]

Answer:

The net present value of this project is $5,809.78.

Explanation:

Note: See the attached excel file for the calculation of net present value of this project.

In the attached excel file, the discounting factor is calculated as follows:

Discounting factor = 1 / (100% + required rate of return)^n

Where n is a particular year in focus.

From the attached excel file, we have:

Net present value = $5,809.78

Therefore, the net present value of this project is $5,809.78.

Download xlsx
5 0
2 years ago
Other questions:
  • What is the south african government providing and to whom
    15·1 answer
  • Corey wants to reorganize the company. Currently there are HR units at each plant, fiscal units at each plant, and purchasing un
    7·2 answers
  • Assume that the company that John and Tina work for wants to give the $50 million to the political campaigns. Which of the follo
    15·1 answer
  • If interest rates rise, which of the following U.S. Government debt instruments would show the greatest percentage drop in value
    9·1 answer
  • When companies watch both their buyers and their competitors, they are called ________ companies.?
    7·1 answer
  • Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30-year, 5% mortgage (where the mortgage factor is
    10·1 answer
  • A regional restaurant chain, CoCo's, is considering purchasing a smaller chain, AJ's, which is currently financed using 20% debt
    6·1 answer
  • Which of the following assumptions would cause the constant growth stock valuation model to be invalid? The growth rate is zero.
    12·1 answer
  • George is the owner of numerous classic automobiles. His intention is to hold the automobiles until they increase in value and t
    15·1 answer
  • fields company has two manufacturing departments, forming and painting. the company uses the weighted average method and it repo
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!