(0.5 points) The Internal Revenue Service is responsible for collecting taxes and interpretation and enforcement of the Internal Revenue Code. 3. What is the capital gains tax? (0.5 points) The capital gains tax is a tax that applies to investments and other personal property. 4.
3. What is the capital gains tax? (0.5 points) is a tax that applies to investments and other personal property. 4. Give at least two examples of types of state taxes.
What does the $2.55 billion increase in Berkshire Hathaway’s market value represent? 2. Choice of valuation methods: What do you think PacifiCorp is worth on its own before its acquisition by Berkshire? Which valuation method should you use to value PacifiCorp and why? Show clearly the steps to arrive at the following estimates in Exhibit 10: Enterprise Value as Multiple of: Revenue EBIT EBITDA Net Income 6,252 8,775 9,023 7,596 6,584 9,289 9,076 7,553 MV Equity as Multiple of: EPS Book Value 4,277 5,904 4,308 5,678 Median Mean If you need to use a discount rate to discount cash flows then an appropriate discount rate estimate for PacifiCorp is approximately 9%.
5. Once the break-even point is reached: A. the total contribution margin changes from negative to positive. B. net operating income will increase by the unit contribution margin for each
With the calculated WACC, the initial rate must be at least 7.96% to determine whether to purchase the stocks. Since the revenue has increased, the profit margin will have changes as well. The profit margin equals to Net Income divided by Sales. The Net Income increases as the revenues increasing. In that case, whether the efficiency improves or not is determined by the sales.
What is the amount of its credit carryover and the last year to which the carryover could be used? Answer: $7,750 carried over to 2004 or 2025 4. Margolin Corporation has a regular taxable income of $120,000. It has a positive adjustment of $90,000, preference items of $50,000 and negative adjustments of $40,000. What is its alternative minimum tax?
CAPITAL BUDGETING PROBLEMS: CHAPTER 11 Answers to Warm-Up Exercises E11-1. Categorizing a firm’s expenditures Answer: In this case, the tuition reimbursement should be categorized as a capital expenditure since the outlay of funds is expected to produce benefits over a period of time greater than 1 year. E11-2. Classification of project costs and cash flows Answer: $3.5 billion already spent—sunk cost (irrelevant) $350 million incremental cash outflow—relevant cash flow $15 million per year cash inflow—relevant cash flow $450 million for satellites—opportunity cost and relevant cash flow E11-3. Finding the initial investment Answer: $20,000 Purchase price of new machinery $3,000 Installation costs $4,500 After-tax proceeds from sale of old machinery $18,500 Initial investment E11-4.
It also refers to the worth of the asset. The relevance of market value to accelerated depreciation is that market valuation through accelerated depreciation creates a market for used assets and their sell until they are valueless. Inter-period tax allocation becomes present when there are differences between income tax rules and GAAP rules. An example of this is shown in inter-period tax allocations relevance to depreciation. Depreciation for income tax is based on income tax code and requires that equipment be depreciated over 7 years.
What would be the impact on monthly sales cost, and income? Regular Selling Price Impact: Price $4,350 Quantity $3,000 Revenue $13,050,000 Variable Manufacturing Costs ($5,385,000) Variable Marketing Costs ($825,000) Contribution Margin $6,840,000 *Fixed Manufacturing Costs ($1,980,000) *Fixed Marketing Costs ($2,310,000) Income $2,550,000 Using the regular selling price Income = Revenues – Total costs = $13,050,000 - $10,500,000 = $2,550,000 * Continue to the next page New Selling Price Impact: Price $3,850 Quantity $3,500 Revenue $13,475,000 Variable Manufacturing Costs ($6,282,500) Variable Marketing Costs ($962,500) Contribution Margin $6,230,000 Fixed Manufacturing Costs ($1,980,000) Fixed Marketing Costs ($2,310,000) Income $1,940,000 2) After price reduction, income = $13,475,000 - $11,535,000 =
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price.