This year Lionel borrowed $24,000 from Counti Bank and paid interest of $1,440. Lionel used the loan proceeds to pay his law school tuition. Calculate the amounts Lionel can deduct for interest on higher education loans under the following circumstances: a. Lionel’s AGI before deducting interest on higher education loans is $50,000. b. Lionel’s AGI before deducting interest on higher education loans is $69,000. c. Lionel’s AGI before deducting interest on higher education loans is $90,000.
As the seller, at a bid price of $14,000, the initial cash inflow of $11,406 is surpasses the cost of the equipment of $3,980 (Table 1.1). Also, at the end of a 10 year period, the total seller’s cash flow will be $31,437 and sellers discounted cash flow will be $21,193, which is not much higher than the buyer’s total cash flow. Based on results shown on Figure 1.2, the seller could charge a maximum of $32,360 for the machine, for the buyer to breakeven at the end of the 10 years; however, this price is entirely too high, and as mentioned previously, smaller corporations typically focus on the initial cash outflow, instead of the long run
| | | Student Answer: | | 16.87% | | | | 17.75% | | | | 18.69% | | | | 19.67% | | | | 20.66% | | | | Points Received: | 6 of 6 | | Comments: | | | | Question 3. | Question : | You have a chance to buy an annuity that pays $1,000 at the end of each year for three years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? | | | Student Answer: | | $2,697.93 | | | | $2775.79 | | | | | $2921.86 | | | | | $3,075.64 | | | | $3,237.52 | | Instructor Explanation: | The answer represents the present value of the cash flows discounted by 5.5% over three years.
Leveraged Buyout (“LBO”): Assuming an IRR (usually 20 percent to 30 percent), what would a financial buyer be willing to pay? Usually provides a floor valuation. 3. Of the valuation methodologies, which ones are likely to result in higher/lower value? Precedents usually yield higher valuations than trading comps because a buyer must pay shareholders more than the current trading price to acquire a company.
The loss ratio (or claims ratio) should always be less than 100 in order for an insurance company to make a profit; this means that premiums earned are sufficient to cover losses incurred on a particular line. The second way that these funds are used is to pay expenses incurred in the selling and providing of insurance protection. Some examples would be loss adjustment expenses, commissions, and other expenses. The underwriting gain or loss can be calculated by subtracting claims and expenses incurred from net premiums written. The combined ratio is a common measure of the overall underwriting profitability.
* Risk premium: Arithmetic mean is often used for one-year period valuation, while geometric mean is better for long-term period estimated expected returns. * Beta: Cohen took the average value of historical betas to measure the risk. From my perspective, however, the most recent beta is more representative than the average beta in terms of reflecting future risk. Question 2: What is your estimate of the equity cost of capital? Based on the analysis in question 1, I estimate the cost of equity as following: 9.81% =5.74% + 0.69 * (5.9%) Question 3: How, if at all, would you change Cohen’s debt cost of capital calculation?
Ratio | Formula | Amaon 2013 | eBay 2013 | Debt Ratio | TL/TA | | | In leverage ratio, I choose debt ratio, eBay is 24.6% while Amazon is 54.8%. In this ratio, eBay is lower than Amazon which means eBay has less debt should to pay than Amazon. EBay’s assets are financed more through equity than debt compare to Amazon, illustrated that eBay has a lower risk in operation. In addition, eBay may have more borrowing capacity and financial flexible to enlarge its business than Amazon. Let’s see some profitability ratio to have some in-depth discussion.
The rich will pay more than the poor in absolute terms, but the burden of the tax will be no greater on the rich than it is on the poor. For example, a household earning 20 000 euros may pay 10% tax to the government, totalling 2 000 euros. A rich household in the same country pays 10% on its income of 200 000 euros, totalling 20 000 euros in taxes. There is a difference in total value but the proportional burden is the same on the rich household as it is on the poor household. A regressive tax in one in which the percentage decreases as the taxpayers’ income rises.
People also spend less when they look at their expenses in detail, the researchers found.1 People are more likely to use credit cards versus cash because with cash, you can feel the money leaving you. But just because you don't feel the money leaving, doesn't mean it's not gone. Carrying a balance on your credit card can be very costly. U.S. statistics show the average family has long-term credit card debt in excess of $5,000.2 The higher your interest rate is, the greater the compound interest that will accrue will be. But the credit card companies only advertise the simple rate of interest to you.
A person may spend a few years of their life paying their loans off from college but in the end it is worth every penny spent. In 2007, the U.S. Census Bureau’s median earnings for full-time workers at least 25 years old are shown as followed: high school diploma, $32, 500; associate’s degree, $42,000; bachelor’s degree, $53,000; master’s degree, $63,000; and professional degrees, $100,000+. By looking at those numbers, I would have to say that a college degree should be at the top of anyone’s priority list. Without a college degree, a person is limited to what kind of job he/she can hold. With the way the world is changing, most jobs out there are requiring a college degree to even be qualified for the job.