The difference resulted from $60,000 of nondeductible premiums on Ajax's officers' life insurance and $40,000 of rental income received in advance. Rental income is taxable when received. Ajax's effective tax rate is 30%. In its Year 2 income statement, what amount should Ajax report as income tax expense-current portion? 5.
The parent receives annual dividends from the subsidiary of $2,500,000. If the parent's marginal tax rate is 34% and if the exclusion on intercompany dividends is 70%, what is the effective tax rate on the intercompany dividends, and how much net dividends are received? Question 20 New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14% coupon, 30-year bond issue that was issued 5 years ago. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market.
DSO = Receivables / Ave. sales per day Receivables= DSO * Ave. sales per day = 20 * 20,000 Receivables= $400,000 (3-2) Debt Ratio: Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Debt ratio = 1 – (1 / Equity multiplier) Debt ratio = 1 – (1/2.5) = 1 - .40 = .60 Debt ratio = 60% (3-3) Market/Book Ratio: Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets.
What amount should Ruiz record on March 1, 2010 as paid-in capital from stock warrants? (Points : 4) $28,800 $33,600 $41,600 $40,000 3. (TCO A) On January 1, 2010, Trent Company granted Dick Williams, an employee, an option to buy 100 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $900. Williams exercised his option on September 1, 2010, and sold his 100 shares on December 1, 2010.
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. If Dana’s state tax rate increases to 10%, corporate bonds are still superior to Treasury bonds. 50. [LO 1] At the beginning of his current tax year David invests $12,000 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $700 in interest ($350 every six months) from the Treasury bonds during the current
Over the life of the machine, net working capital will increase by $30,000 over the life of the project. a. Assuming that the hospital is a non-profit entity, what is the project’s net present value (NPV) at a discount rate of 8%, and what is the project’s IRR? b. Assuming that the hospital is a for-profit entity and the tax rate is 30%, what is the project’s NPV at a cost of capital of 8%, and what is the project’s
Problem 13-23A Financial statements for Pocca Company follow. (See Excel) Use the financial statements for Pocca Company from Problem 13-22A to calculate the following ratios for 2006 and 2005. Working capital Current ratio Quick ratio Accounts receivable turnover (beginning receivables at January 1, 2005, were $47,000.) Average number of days to collect accounts receivable Inventory turnover (beginning inventory at January 1, 2005, was $140,000.) Average number of days to sell inventory Debt to assets ratio Debt to equity ratio Times interest earned Plant assets to long-term debt Net margin Asset turnover Return on investment Return on equity Earnings per share Book value per share of common stock Price-earnings ratio
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
During 2011, Z-Mart made installments sales of $300,000 and received payments of $135,000 on those sales. Z-Mart's gross profit on sales is 30%. Required: Prepare the necessary journal entries for 2011. 10 Solutions Multiple Choice Question Number Answer 1 a 2 c 3 b 4 c 5 d 6 c 7 a
FI 515 Homework week 2. 3-1 Days Sales Outstanding Days sales outstanding= receivables/ave sales per day= receivables/annual sales/365) 20 days x $20,000= $400,000 3-2 Debt Ratio Debt ratio formula=Debt ratio +equity ratio=1 Equity ratio = 1/EM….the equity multiplier is 2.5 1 / 2.5 = .40 equity ratio Debt ratio= debt ratio +equity ratio=1 1-equity ratio=debt ratio 1-.40=.60%=debt ratio 3-3 Market/Book Ratio Market value per share =$75 Common equity =6 billion Number of shares outstanding =800M Market value per share/ (common equity/# of shares outstanding)= market/book ratio $75/(6,000,000/800,000,000) = $75/7.5 10 billion= market to book ratio 3-4 PE Ratio Price per share/earnings per share= P/E Price per share/cash flow per share= Price/cash flow