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grandymaker [24]
3 years ago
8

Hugh has the choice between investing in a city of heflin bond at 6.60 percent investing in a surething bond at 10.00 percent. a

ssuming that both bonds have the same nontax characteristics and that hugh has a 40 percent marginal tax rate, what interest rate does surething inc., need to offer to make hugh indifferent between investing in the two bonds?
Business
1 answer:
butalik [34]3 years ago
8 0

Answer: Surething Inc, needs to issue bonds with 11% interest rate in order to make Hugh indifferent between investing in two bonds.

We arrive at the answer in the following manner:

The City of Helfin bonds are municipal bonds and hence they are tax free. This means that Hugh will get an after - tax return of 6.6%.

The bonds of Surething Inc offering a 10% interest, however are taxed at 40%. So, the current after-tax returns of the bond is:

After - tax return= Pre- tax return * (1 -tax rate)

After-tax return= 0.1 * (1-0.4)

Current after tax return = 0.06 or 6%

However Hugh will be indifferent to investing in these two bonds only if they offer the same after-tax return of 6.6%.

Given this, we can calculate the indifference rate as follows:

After - tax return= Pre- tax return * (1 -tax rate)

0.066= Pre- tax return * (1 -0.4)

\frac{0.066}{0.6}= Pre-tax return

Pre-tax return = 0.11 or 11%.

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wgu A real estate agent representing the buyer tells the seller that the buyer would be willing to pay much more than the asking
yKpoI14uk [10]

Answer:

The correct answer is Duty of loyalty.

Explanation:

The corporate sphere bears an important analogy with the contractual one, in the sense that in both the agreements of the parties and the provisions of the law must be fulfilled, that is, there is a duty of loyalty of the partners and a duty of loyalty of the administrators. However, any action carried out by a subject, over and above private covenants or regulatory provisions, must follow a standard of conduct that imposes a certain ethical behavior in legal relationships, that of good faith.

Therefore, and without delving into the normative level, noting that behaving under the strict principle of good faith with society would be the partner's main duty. Here it is possible to know the concrete scope of this principle as a source of special duties for the parties in the corporate sphere. Thus, a duty-generating principle is derived from it: cooperation, information and protection.

7 0
3 years ago
Goods and services are purchased by businesses as well as by individuals. O a. True O b. False​
frozen [14]

Answer:

true

they are e.g like our capitalists

3 0
3 years ago
Carla Beverage Company reported the following items in the most recent year. Net income $44,400 Dividends paid 6,720 Increase in
GuDViN [60]

Answer:

$45,780  Operative Cash Flow  

$55,560  Cash Flow Ind Method  

Explanation:

$55,560  Cash Flow Ind Method  

$44,400  Net Income  

$4,350  Depreciation  

-$6,720  Dividends  

-$10,320  Accounts Receivable  

$7,350  Accounts Payable  

$24,690  Notes Payable  

-$8,190  Property and Equipment  

$45,780  Operative Cash Flow  

$44,400  Net Income  

$4,350  Depreciation  

-$10,320  Accounts Receivable  

$7,350  Accounts Payable  

To prepare the statement of cashflow it's necessary to calculate the difference between the balance on each year.

First we need the value of the Net Income and Depreciation of the year as initial value of the cash flow ($55,560+$4,350),  

then we deduct the amount of dividends paid during the year (-$6,720).  

Then we begin to calculate the Assets section, everytime that the Assets are higher than the past year we have to put money  

from the cash flow to compensate the assets increase and vice versa, with exception of the Cash Accounts that we are calculating.

Per Example: Accounts Receivable -$10,250.

Property decreased Cash flow which means that we buy some assets (-$8,190 )

Then with the Liabilities we do the same but in this case an increase in the liabilities means we have more money to our cash flow,

per example, an increase in the accounts payable means that we paid less to our suppliers so we have the money in the cash accounts.  

Per Example: Accounts Payables $7,350.

The Cash provided by the operative activities try to find the cash inflows and outflows caused by the company's operations,  

so it only includes the income statement and from the balance the deviation in the Accounts Payable, Inventories,  

Depreciation and the account payable segment.  

This statement doesn't include Sales and purchases of assets, dividend distributions and financial movements because this are among the  

non operating activities that affect cashflow.  

8 0
3 years ago
Abby consumes only apples. In year1, red apples cost $1 each, green apples cost $2 each, and Abby buys 10 red apples. In year 2,
Hitman42 [59]

Answer:

Part A)  

Consumer price index is an amount of the average variation over time in the amounts paid by customers for a market basket of customer goods and services.

CPI= (Updated Cost/Base Period Cost) x 100

For multiple products, we have to ruminate the weights or proportion of expenditure of an item

CPI2= (P2Red xQ1Red) + (P2grn x Q1grn) / (P1Red xQ1Red) + (P1grn x Q1grn)

CPI2= (2 x 10) + (1x0)/ (1x10) + (2x0)

CPI2= 2

Based on the CPI in year 2, prices have doubled.

Part B)

Nominal expenditure is the total worth of outcome produced or expended in each year.

In year 1 and year 2, Abby buys

Year 1= $1 x 10= $10

Year 2= $1 x 10= $10

So, nominal expenditure remains constant at $10.

Part C)

Real expenditure is the quantity consumed or the basket in the current year calculated at the base year price.

Base year prices: Red $1& Green $2

Real expenditure in year 1  = (P1rQ1r) + (P1gQ1g)

                                               =$1x10 + X2x0

                                               = $10

Real expenditure in year 2  = (P1rQ2r) + (P1gQ2g)

                                       = (1x 0) + (2 x 10)

                                       = $20

So, real expenditure has increased from $10 to $20

Part D).

Implicit value deflator in year 1, it is the base year so it will be continuously 1 as the actual and nominal amounts are equal.

Implicit price deflator in year  = nominal expenditure/real expenditure

Implicit price deflator in year 1 = 10/10

                                                = 1

Implicit price deflator in year2  = 10/20

                                                = 0.5

Thus, the implicit value deflator proposes that prices have dropped by half. The cause for this is that the deflator evaluations how much Abby standards her appeals using prices dominant in year 1.

We can perceive from this perception that the green apples are appreciated more .And when Abby consumes more green apples in year 2, it appears that her consumption has augmented as the price deflator standards green apples more than the red apples.

Part E)

Abby considers that red apples and green apples as perfect alternatives, then the cost of living in this budget has not changed in both year it costs $10 to eat 10 apples.

Permitting to the CPl, however, the cost of living has gathered. This is because it only takes into justification the detail that the red apple price has gathered; the CPl overlooks the fall in the price of green apples as they were not in the consumption package in year 1.

In difference to the CPI, the implicit value deflator approximations the cost of living has shared.

CPI is calculated based on the Laspreyers Index method, where the amount in the numerator is the amount in the base year. Where as in the Passche price index, the numerator is the Recent price calculated for current capacity of consumption.

The Laspeyres index inclines to exaggerate rise (in a cost of living framework), while the Paasche index tends to understate it, because the indices do not account for the fact that consumers typically react to value variations by changing the amounts that they buy. For example, if prices go up for good X then, at ceteris paribus, amounts of that good should go downcast.

7 0
3 years ago
Though we don't use them as much any more, if you open a checking account, you will receive these. What are they called?
Ksju [112]

Answer:

You will receive (C) Checks.

4 0
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