Question

31. A Treasury bond paid $100 in interest income to an individual whose federal tax rate

      is 25% and whose state tax rate is 5%. What dollar amount of taxes is owed by this

      person?

                          

                                                                                                                                                    

32. Calculate the maximum price an investor should pay for a common stock assuming:

      last period’s dividend was $4, the growth rate is 5%, the required rate of return is

      9%.

                                                                                                                                                   

                                                                                                                                 

33. A company postponed paying a preferred stock dividend this quarter. What dividend

      may be paid to common stockholders?

               

                                 

34. Suppose a zero-coupon bond is not owned within a tax-sheltered account. How often

      must earned income be reported for tax purposes?

                                                                                                                                                 

                                                                                                                                                

                                                                                                                                               

35. The market price of a common stock is $75 but an investor estimates its value as $90.

      Calculate the net present value.

                                                                                                                                                     

                                                            

36. A corporation has taxable income of $100,000, its tax rate is 25%, and it paid a

      dividend of $25,000. There is no preferred stock financing. Calculate the increase in

      retained earnings.

                                                                                                                                                                                                                                                                                                           

37. A preferred stock pays a dividend of $4 per share. The market price of the preferred

      stock is $70. What value of k_p would cause NPV = 0?

    

38. When a company issues common stock does this imply a contractual obligation to

       pay dividends?

                                                                                                                                                                                                                                                                                           

                                                                                                                   

39. Consider a preferred stock whose market price is $20 and whose NPV = 0. What is

      the exact value of this preferred stock from the perspective of an investor?

Answer 1

31. A Treasury bond paid $100 in interest income to an individual whose federal tax rate is 25% and whose state tax rate is 5%. What dollar amount of taxes is owed by this       person?
Dollar amount of taxes is owed	$0
Treasury bnd are exempted from  federal income tax and state income tax
32. Calculate the maximum price an investor should pay for a common stock assuming:  last period’s dividend was $4, the growth rate is 5%, the required rate of return is       9%.
Current Price = D0 x (1+g)/(r-g)
Current Price = 4 x (1+5%)/(9%-5%)	$     105.00	per share
33. A company postponed paying a preferred stock dividend this quarter. What dividend may be paid to common stockholders?
Dividend to Common shareholders	$0
Whenever company distributes dividend  first it will be distributed to preferrd shareholders and remaining to common shareholders
34. Suppose a zero-coupon bond is not owned within a tax-sheltered account. How often       must earned income be reported for tax purposes?
Investors do not receive any coupon payments until maturity with zero-coupon bonds, they must pay tax on the annual interest accrual on these securities.
Annually