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Rus_ich [418]
3 years ago
11

Boulderado has come up with a new composite snowboard. Development will take Boulderado four years and cost $250,000 per year, w

ith the first of the four equal investments payable today upon acceptance of the project. Once in production the snowboard is expected to produce annual cash flows of $200,000 each year for 10 years. Boulderado's discount rate is 10%. Calculate the IRR for the snowboard project and use it to determine the maximum deviation allowable in the cost of capital estimate that leaves the investment decision unchanged.
Business
1 answer:
ehidna [41]3 years ago
3 0

Answer:

a) 13.704%

b) 3.704%

Explanation:

Development of composite snowboard = 4 years

Total cost / investment = 250,000 * 4 = $1,000,000

Annual cash flows ; $200,000  for 10 years

discount rate = 10%

cash flow at t = 0 =  ( Total cost / investment ) = - $1,000,000

<u>a) calculate the IRR for the snow board </u>

attached below is the calculation using online tool

IRR = 13.704%

<u>b) maximum deviation allowable in cost of capital</u>

maxi deviation = IRR - r

                         = 13.704% - 10% = 3.704%

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E. $60,500

Explanation:

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Why is it important to conduct market research on your target audience before building your marketing plan?
Tcecarenko [31]
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3 years ago
Greiner, Inc., a calendar year S Corporation, holds no AEP. During the year, Chad, an individual Greiner shareholder, receives a
Likurg_2 [28]

Answer:

The long term capital gain= $30000-$25000

The long term capital gain= $5000

The basis in stock will be zero after the distribution.

Explanation:

Step 1 of 3

Tax treatment of amount distributed to shareholders:

The amount received as distribution to a shareholder under S Corporation is equal to the cash and fair market value of property distributed. The distribution is considered as tax-free to the limit that it does not exceed shareholder’s basis in the company’s stock. Any amount received in excess of basis will be treated as capital gain.

Step 2 of 3

However, taxation depends whether S Corporation has ever been a C Company or it posses’ accumulated earnings and profits. If it was never a C Corporation or doesn’t holds AEP then distribution equals to basis of share in S Corporation is a tax free gain for shareholder. Gain over and above basis is taxed as capital gains.

Step 3 of 3

In the given problem, C is a shareholder in S Corporation. He receives $30,000 as cash distribution. His basis in stock is $25,000. The distribution up to basis of stock is tax free distribution and above that is charged to capital gains. It is as follows-

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All of the following questions are open-ended problems. You must compute an answer for every problem. For percentage answers, ca
DerKrebs [107]

Solution :

13. Net income = total assets x ROA

                   = $ 1,000,000 x 12%

                  = $ 120,000

Net Income for company is $120,000.

Net Profit margin = 4.25%

Total sales = net income / net profit margin

                  = $ 120,000 / 4.25%

                  = $ 2,823,529

Total sales for company is $ 2,823,529

14. Debt ratio = 72%

   So weight of debt = 72%

   Weight of equity = 1 - 72%

                                = 28%

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                                 =  2.57

   Debt equity ratio is 2.57

15. Debt ratio = 42.50%

So, weight of debt = 42.50%

Weight of equity = 1 - 42.50%

                             = 57.50%

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16.

Debt Equity ratio = 1.45

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Weight of equity = 40.82%

Return on assets = 16%

Return on equity = 16% / 40.82%

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Return on equity is 39.20%.

17.

Total Assets turnover = Sales / Total Assets

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Total Assets turnover is 0.50.

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