Note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return. Thus, she should choose the corporate bond. When the state rate is 10%, Dana would achieve the following returns from the Treasury bond or the corporate bond: The Treasury bond would still yield $1,125 or $30,000 x [.05 x (1-.25)] after tax because state rates don’t affect after- tax returns from Treasury bonds. The corporate bond yields $1,215 or $30,000 x [.06 x (1 - .25 - .10(1-.25))] after tax. Again, note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return.
This is consistent with FASB codification ASC250-10-45-23 2. What effect, if any, does eVade’s decision to participate in the tax amnesty program have on the amount recognized as of March 31, 2012? According to ASC250-10-50-9 the participation in the tax amnesty program will cause a liability to be recorded in the current year statements and adjustments for prior periods. If comparative financial statements are issued, the prior year column will need to reflect the adjustment and a change in opening balance (retained earnings) for the current year. 3.
Cost of Goods Sold increased from year 6 to year 7 by $1,048,000.00, or 31.80%. This is normal when sales increase and it is positive that the percentage is lower than sales. From year 7 to 8 Cost of goods sold decreased by $630,400.00 or -14.5% from 7 to 8. This reflects the reduction in sales. It is good that the percentage decrease was lower than sales decrease.
Since the Walton Work Wear line is in the production stage, its accumulated development costs should be capitalized. The Carroway Cool Top has not started it commercial production which would allow the development costs not to be amortized yet. Also interest costs on loans to generate financing for the R&D activates of a product can be capitalized rather than expensed. The capitalization of interest would allow CCL to reduce taxable income in the future when it is more profitable. I would recommend that CCL make the above changes immediately so that the financail statements are not incorrect.
How does the answer change if a discount of $10 must be given to reach the same level of impact that the $5 discount received? • The impact of offering the discount of $10 in September according to Sandra’s idea. The optional aggregate plan is shown in Table below. Total Cost = $17,184,437.5 Revenue = $53,510,000 Profit = $36,325,563 • The impact of offering the discount of $10 in November according to Bill’s idea. The optional aggregate plan is shown in Table below.
Note - we excluded Agile Connections from our comparable set as it had negative net income and thus do not reflect the risk profile and operations of our company. CAPM: re = 4.25% + .611106(5%) = 7.30553% B. This is not the same discount rate that should be used on the terminal value. The terminal value should be discounted by WACC. The discount rate above should only be used to discount unlevered cash flows.
| | Instructor Explanation: | Since a change in costs to produce the product is a supply factor, an increase in costs would be expected to decrease bicycle supply. Remember that supply is a schedule of how many units suppliers are willing to offer at different prices. When costs rise, the supply curve decreases or shifts to the left. Since changes in producer costs is not a demand factor, there would be no impact on demand. | | | | Points Received: | 10 of 10 | | Comments: | Good, JP | | | 2.
Therefore, the cost of fixed rate debt equals 8.95% plus 1.1% risk premium, which totaled to 10.5% Cost of Debt = (0.5 x 0.08) + (0.5 x 0.105) = 0.095 = 9.25% [since floating rate and fixed rate debt both weigh 50%, we use the weighted average approach to calculate the total cost of debt rate] Based on historical data analysis below, we get an average income tax rate of 42%. | 1978 | 1979 | 1980 | 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | Income before income taxes | 83.5 | 105.6 | 103.5 | 121.3 | 133.7 | 185.1 | 236.1 | 295.7 | 360.2 | 398.9 | Income tax | 35.4 | 43.8 | 40.6 | 45.2 | 50.2 | 76.7 | 100.8 | 128.3 | 168.5 | 175.9 | Tax rate | 42% | 41% | 39% | 37% | 38% | 41% | 43% | 43% | 47% | 44% | | | | | | | | | | | | Average tax rate | 42% | | | | | | | | | | After-tax cost of debt = (1 - 0.42) x 0.0925 = 0.05365 = 5.365% Cost of Equity From Table B and Exhibit 5, * Risk free rate (1-year)= 6.9% Premium = 8.47% * Risk free rate (10-year)= 8.95% Premium = 7.43% ** ** Since A rated bond is considered upper medium grade and the company is A rated, we assume long-term
As the costs of consuming Petrol and Diesel are not fully taken into account by the consumer, the difference between the social costs and private costs results in a negative externality. Negative Externalities occur when an economics activity affects third parties; those not directly involved in the making of a decision. As producers are only interested in maximising profits; they only take into account private costs and benefits that arise from their decisions. Therefore they would supply a higher amount than optimum that would result in an overproduction at Q1. As the producer creating the externality does not take it into account and the consumer does not fully pay for the resulting externalities, market inefficiencies result in the form of market failure.
This cost varies with the number of subscribers, i.e. the market share. A market share of 65% results in 208650 households and a cost of $8,388,865 / month. Break-even point If we assume a market share of 65%, the total cost / month (sunk cost + running costs) would be $10,631,448. The break even point at a market share of 65% would be $50.95 ($10,631,448/208650 households).