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Gelneren [198K]
2 years ago
12

A corporation can earn 7.5% if it invests in municipal bonds. The corporation can also earn 8.30% (before-tax) by investing in p

referred stock. Assume that the two investments have equal risk. What is the break-even corporate tax rate that makes the corporation indifferent between the two investments? Assume a 70% dividend exclusion for tax on dividends. (Do not round your intermediate answer and round your final answer to two decimal places.)
Business
1 answer:
Kryger [21]2 years ago
3 0

Answer:

32.13%

Explanation:

The computation of the break-even corporate tax is shown below:

As we know that

Municipal bond return = preferred stock return before tax  × [1 - (1 - dividend exclusion) × Break even corporate tax]

7.5 = 8.30 ×  [1 - ( 1 - 0.70) × Break even corporate tax ]

7.5 ÷ 8.30 = 1 - 0.30 × Break even corporate tax

0.9036 = 1 - 0.30 × Break even corporate tax

0.30 × Break even corporate tax = 1 - 0.9036

So, Break even corporate tax is

= 0.0964 ÷ 0.30

= 32.13%

Basically we applied the above formula

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To keep an organization free of the mum effect, it is necessary to foster a transparent and open work culture.
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2 years ago
It’s important in business today for all firms to work to cut out the middleman. Intermediaries represent costs that can be save
vivado [14]

Answer:

Yes: Middlemen represents costs

No: Middlemen could have exclusive access to customers

No: Cutting out middlemen will lead to unemployment on the long run

Explanation:

Why it is true that cutting off middlemen could reduce business costs in the sense that they (middlemen) usually buy from manufacturers and charge additional costs before selling to final users, it should also be known that sometimes these middlemen bridge the gap between supply and demand by taking the products from where they are produced to where the customers are found.

A second consideration is that cutting off middlemen will as a result create unemployment for all those middlemen that will be cut off.

8 0
2 years ago
Mufala, Inc., will issue $10,000,000 of 6% 10-year bonds. The market rate for bonds with similar risk and maturity is 8%. Intere
zubka84 [21]

Answer:

the issue price of the bond is $8,640,999

Explanation:

The computation of the issue price of the bond is shown below:

Particulars                       Amount       PV factor   Present value  

Semi-annual Interest     $300,000     13.59033  $4,077,099  

Principal                         $10,000,000  0.45639  $4,563,900  

Issue price of the bonds                                        $8,640,999

Therefore the issue price of the bond is $8,640,999

4 0
2 years ago
For a project, the following earned value data have been assessed: AC: $ 4,000,000 CV: $ -500,000 SPI: 1.12 BAC: $ 9,650,000 Wha
Morgarella [4.7K]

Answer:

The BCWS is also known as Planned Value (PV).

So, in this way, <em>PV = 3.125.000</em>

Explanation:

With the data we can obtain the PV as follows:

First, let's calculate EV as EV = CV + AC.

EV = -500.000 + 4.000.000 = <em>3.500.000</em>

After this, we can calculate PV with this formula: SPI = EV/PV

PV = EV/SPI

PV = 3.500.000/1.12 = <em>3.125.000</em>

<em />

<em>We can conclude, with these results, that the project actually is forward about the schedule but with an overcost about the budget. In other words, the project advance must be 41%  but now is on 36% due to the negative variance on the costs (CV).</em>

<em />

7 0
2 years ago
The Assembly Department of​ GigaGo, Inc., manufacturer of​ computers, had 2 comma 000 units of beginning inventory in​ September
Alenkasestr [34]

Answer:

8,000 units need to be accounted for

Explanation:

The Weighted Average  method Calculates the cost per unit by Adding the costs in Opening Work in Process and the Costs added in process department during the period. This cost is then divided by the the Sum of units in closing Work in Process and units of Completed goods.

The Units that needs to be Accounted for is the <em>Sum of</em> the units in Opening Work In Process and the units Transferred into the Assembly Department.

7 0
2 years ago
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