Question

In: Finance

Komiko Tanaka invests $17,000 in LymaBean, Inc. LymaBean does not pay any dividends. Komiko projects that...

Komiko Tanaka invests $17,000 in LymaBean, Inc. LymaBean does not pay any dividends. Komiko projects that her investment will generate a 10 percent before-tax rate of return. She plans to invest for the long term.

a. How much cash will Komiko retain, after-taxes, if she holds the investment for five years and then she sells it when the long-term capital gains rate is 15 percent? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar)

Cash Retained=

b. What is Komiko’s after-tax rate of return on her investment in part (a)? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)

After tax rate of return=

c. How much cash will Komiko retain, after taxes, if she holds the investment for five years and then sells when the long-term capital gains rate is 25 percent? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Cash Retained=

d. What is Komiko’s after-tax rate of return on her investment in part (c)? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)

After tax rate of return=

e. How much cash will Komiko retain, after taxes, if she holds the investment for 15 years and then she sells when the long-term capital gains rate is 15 percent? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Cash Retained=

f. What is Komiko’s after-tax rate of return on her investment in part (e)? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)

After tax rate of return=

     

    

    

Solutions

Expert Solution

Cash retained after taxes = Amount she will receive from her investment in n years - tax on her capital gains

After tax rate of return = [[Cash retained / Initial investment] ^1/n] - 1

Using these two concepts, below are the calculations.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Jack Hammer invests in a stock that will pay dividends of $3.13 at the end of...
Jack Hammer invests in a stock that will pay dividends of $3.13 at the end of the first year; $3.56 at the end of the second year; and $3.99 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $63. What is the present value of all future benefits if a discount rate of 13 percent is applied? Use Appendix B for an...
a) Suppose that gold, which does not pay any dividends and has no convenience value, is...
a) Suppose that gold, which does not pay any dividends and has no convenience value, is currently trading at 1350 USD per ounce in the spot market. The LIBOR rate is 2% per year and the cost of storing and insuring gold is 1.50 USD per ounce for 180 days, payable at the end of the period. Based on these, determine the theoretical price of a forward contract on gold that has 180 days till maturity. b) Assume that your...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 75% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 10% per year. If the required return on the stock...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $0.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 75% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 7% per year. If the required return on the stock...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 70% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 7% per year. If the required return on the stock...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain...
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 70% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 6% per year. If the required return on the stock...
C. A company does not pay any dividends for 5 years. Then, it starts paying $6...
C. A company does not pay any dividends for 5 years. Then, it starts paying $6 in year 6. This continues perpetually. What is the market price of the stock? The bond rate , market premium and beta are .02, .06 and 1.8 respectively.
Question 1 a. Simpkins Corporation does not pay any dividends because it is expanding rapidly and...
Question 1 a. Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 70% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 4% per year. If the required return...
Pera inc does not currently pay dividends. The company will start with an annual dividend of...
Pera inc does not currently pay dividends. The company will start with an annual dividend of $13 at the end of year 4 and will pay the same amount each year until year 8. Thereafter, it will increase the dividends by 2% per year forever. If the required rate of return on this stock is 8%, what is the price of this stock today?
M.cq answer needed with workings immediately Ray Inc. company is not expected to pay any dividends...
M.cq answer needed with workings immediately Ray Inc. company is not expected to pay any dividends for three years while it attempts to restructure its business. They anticipate paying $1.50 in year four and thereafter growing at a rate of 6%. What should we pay for the stock if we demand a 15% rate of return? $8.77 $10.96 $14.24 $17.79 $9.50
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT