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dedylja [7]
3 years ago
8

Ben has ​$2 comma 000 in his savings account and the bank pays an interest rate of 14 percent a year. The inflation rate is 9 pe

rcent a year. The government taxes the interest that Ben earns on his deposit at 10 percent. Calculate the nominal​ after-tax interest rate and the real​ after-tax interest rate that Ben earns.    ​>>> Answer to 1 decimal place. ​>>> If your answer is​ negative, include a minus sign. If your answer is​ positive, do not include a plus sign. The nominal​ after-tax interest rate is nothing percent a year.
Business
1 answer:
Alinara [238K]3 years ago
5 0

Answer: After Tax Nominal Rate - 12.6%

After Tax Real Rate - 3.6%

Explanation:

<em>Real Rate of return is defined as the nominal interest rate less inflation. </em>

The After Tax Real Rate therefore caters for tax from the Nominal rate and then deducts Inflation.

The formula is,

= Nominal Rate( 1 - tax rate) - Inflation rate

= 14% ( 1 - 10% ) - 9%

= 14 ( 90% ) - 9

= 3.6%

The <em>Nominal Rate is simply the Real Rate plus Inflation</em>. The After tax real rate has already being found so the After Tax Nominal Rate is,

= 3.6 + 9

= 12.6%

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3 years ago
Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable
Dmitry_Shevchenko [17]

Answer:

A) 11

Explanation:

The degree of operating leverage measures change in earning before interest and tax (EBIT) to change in sales.

Solution:

Formula

DOL = Percentage change in EBIT / Percentage change in sales

Percentage Change in EBIT = EBIT(1) / EBIT(2) - 1

Percentage Change in Sales = Sales(1) / Sales(2) - 1

<em>Strong economic Condition</em>

Sales = $1 Price x 1,200,000 units = $1,200,000

Variable Cost (VC) = $0.5 variable cost x 1,200,000 units = $600,000

Fixed cost (FC) = $500,000

EBIT = Sales - VC - FC

EBIT = $1,200,000 - $600,000 - $500,000

EBIT = $100,000

<em>Weak economic Condition</em>

Sales = $1 Price x 1,100,000 units = $1,100,000

Variable Cost (VC) = $0.5 variable cost x 1,100,000 units = $550,000

Fixed cost (FC) = $500,000

EBIT = Sales - VC - FC

EBIT = $1,100,000 - $550,000 - $500,000

EBIT = $50,000

Solving for DOL:

Percentage Change in EBIT = $100,000/50,000 - 1

Percentage Change in EBIT = 100%

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4 0
2 years ago
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3 years ago
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Eddi Din [679]

Cash flow can be negative before debt and equity injections and must not be negative afterward.

The income statement recognizes income and expenses when cash is incurred, not when cash is actually exchanged. A cash flow statement records cash inflows and outflows when they actually occur.

The present value method calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to date using the hurdle rate.

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7 0
1 year ago
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Answer: $290,000

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3 years ago
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