The before-tax IRR is 37.93%
The after-tax IRR is 19.32%
The internal rate of return (IRR) is defined as the return rate on a project investment project over a periodic lifespan.
It is also referred to as the net present value of an investment project which is zero. It can be expressed by using the formula:
where;
= net cash inflow for a time period (t)
Total initial investment cost
<h3>(a)</h3>
For the before-tax IRR:
The cash outflow = $120000
Cash Inflow for the first three years = $60000
Cash inflow for the fourth year = $60000 + $20000 = $80000
∴
Using the above formula, we have:
By solving the above equation:
r = 37.93%
<h3>(b) </h3>
For the after-tax IRR:
The cash outflow = $120000
Recall that:
- Cash Inflow = Cash inflow × Tax rate
∴
For the first three years; the cash inflow is:
For the fourth year, the cash inflow is
Using the above IRR formula:
By solving the above equation:
r = 19.32%
Learn more about the internal rate of return (IRR) here:
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Answer: For 2014, Korte would report comprehensive income of $341,000.
Explanation:
Korte Company
Comprehensive income statement for 2014 (extract)
Sales revenue $1,500,000
Cost of goods sold (1,050,000)
Gross profit 450,000
Operating expenses (165,000)
<em>Other income:</em>
Unrealised gain on AFS securities 50,000
Dividends received 6,000
Comprehensive income $341,000
Answer:
The correct answer is I, II and III.
Explanation:
The return that an investor earns with a bond can be calculated in different ways. The price of the bonds fluctuates with the change in interest rates, but once the investor buys a bond, the return is fixed. The yield to maturity is a way of providing the investor with the most accurate representation of the return he will receive for the holding of said bond.
Types of bond yield
Based on the current price, a bond shows three different types of maturity. The yield of the coupon is the interest rate paid by the bond at face value. A US $ 10,000 bond with a 6 percent interest coupon pays US $ 300 interest every 6 months. The current return is the coupon rate divided by the bonus price. If the bond with a nominal value of US $ 10,000 and a 6 percent coupon rate can be purchased for US $ 9,600, its current yield is 6.25 percent. The yield at maturity is the internal rate of return of the bond based on the time remaining for the bond's maturity.
Expiration Yield
The calculation of the yield at maturity amortizes the value of the premium or the discount (bonds over and under the pair) in the price of the bond throughout the life of the bond. For example, if the bond that pays 6 percent of the aforementioned coupon rate expires in 10 years, and is priced at US $ 9,600, the yield at maturity is 6,558 percent. If two bonds, one on the pair and one under the pair, have the same yield at maturity, any of them represents the same level of return for the investor. The yield at maturity is what the investor will receive if the bond is purchased at the current market price and held until maturity.
The amount by which federal spending exceeds revenue in a given year is known as budget deficit. Having a budget deficit means that the government spent more money than they made in a current year. When this happens the government owes money to others because they had to borrow from accounts to pay off debt.
