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shutvik [7]
1 year ago
14

You believe that you can earn 2% more on your portfolio if you engage in full-time stock research. However, the additional tradi

ng costs and tax liability from active management will cost you about .5%. You have an $800,000 stock portfolio. What is the most you can afford to spend on your research?
Business
1 answer:
Korolek [52]1 year ago
6 0

Answer:

the most spend on research will be $12,000

Explanation:

given data

earn =  2% more

trading costs = 0.5%

stock portfolio = $800,000

solution

we know that here net earnings due to research is expected is

net earnings due to research = 2% - 0.5 %  = 1.5 % of stock portfolio

so

spend on research is = 1.5 % of stock portfolio

spend on research is = $800,000  × 1.5%

spend on research is = $12,000

so here when we spend more than $12,000 it end up in a net loss

so the most spend on research will be $12,000

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Answer:

See below

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1. The net cash after-tax cash flow effect of the preceding information of using the indirect method.

First, we need to calculate the pretax income.

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Direct method

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Add :

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