Sunshine Company is a calendar year accrual-basis taxpayer and is in its first year of operations. Sunshine Company had the following income, expense, and loss items for the current year:

Furthermore, Sunshine’s liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year.

1. Assume that Sunshine Company is an s-corporation. Alvin contributed $60,000 in exchange for 60% of the stock while his wife’s best friend, Ann, contributed $40,000 in exchange for the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary ($28,800 in total). Ann doesn’t work for the company so she received no salary. The company made a $55,000 partial distribution of profits at the end of the year. (9 points)
   1. Calculate Sunshine’s ordinary income and separately stated items to be reported on Form 1120S.
   2. What amount and type of income must Alvin report on his individual Form 1040 tax return?
   3. What amount of Alvin’s income will be subject to self-employment tax?
   4. What is Alvin’s basis in his Sunshine Company stock at the end of the year?

Note that you do not need to complete Form 1120-S but this form and related schedules will be a useful guide in completing this portion of the assignment.

Trend Analysis - The following data pertain to Company A:

Common-Size Income Statements - Company A reported the following income statements:

Using the data above, answer the following: (provide formulas used to answer questions)

(1) Show the decomposition of return on equity for Company A for Years 1 and 2?

(2) Compute the return on assets for Company A for Years 1 and 2?

(3) Comment on Company A's use of debt?

Trend Analysis - The following data pertain to Company B:

Common-Size Income Statements - Company B reported the following income statements:

Using the data provided above, answer the following questions: (provide formulas used to answer questions)

(4) Show the decomposition of return on equity for Company B for Years 1 and 2?

(5) Compute the return on assets for Company B for Years 1 and 2?

(6) Comment on Company B's use of debt?

Sunshine Company is a calendar year accrual-basis taxpayer and is in its first year of operations. Sunshine Company had the following income, expense, and loss items for the current year:

Furthermore, Sunshine’s liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year.

1. Assume that Sunshine Company is a c corporation. Alvin contributed $60,000 to purchase 60% of the stock while his wife’s best friend, Ann, contributed $40,000 to purchase the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary ($28,800 in total). Ann doesn’t work for the company so she received no salary. The company distributed some profits at the end of the year by paying out a $55,000 dividend.
   1. Calculate Sunshine Corporation’s taxable income and income tax liability to be reported on Form 1120.
   2. What amount and type of income must Alvin report on his individual Form 1040 tax return?
   3. What amount of Alvin’s income will be subject to self-employment tax?
   4. What is Alvin’s basis in his Sunshine stock at the end of this year?

Note that you do not need to complete Form 1120, but this form and related schedules will be a useful guide in completing this portion of the assignment.

IMPORTANT - All information is provided, form 1120 is a tool that might help you solve the problem. The related schedules that are linked to form 1120 are useful as well, but not entirely necessary to solve the exercise. Form 1120 can be found on IRS official site.

NOTE- The solution below is not correct, do not use it to answer the question again.

On January 1 of this year, Olive Corporation issued bonds. Interest is payable once a year on December 31. The bonds mature at the end of four years. Olive uses the effective-interest amortization method. The partially completed amortization schedule below pertains to the bonds:

b. When the bonds mature at the end of Year 4, what amount of principal will Olive pay investors?

c. How much cash was received on the day the bonds were issued (sold)?

d. Were the bonds issued at a premium or a discount? If so, what was the amount of the premium or discount?

e. How much cash will be disbursed for interest each period and in total over the life of the bonds?

f. What is the coupon rate? (Enter your answer as a percentage rounded to 1 decimal place (i.e. 0.123 should be entered as 12.3).)

g. What was the annual market rate of interest on the date the bonds were issued? (Enter your answer as a percentage rounded to the nearest whole percent (i.e. 0.123 should be entered as 12).)

h. What amount of interest expense will be reported on the income statement for Year 2 and Year 3?(Round your final answers to nearest whole dollar amount.)

i. What amount will be reported on the balance sheet at the end of Year 2 and Year 3?

1. Zayes, LLC. has identified the following cashflows for a four-year project.

Year                          Cashlow

1.    -$79,80
2. 34,000
3. 41,000
4. 28,000
5. 21,000

1. What is the project’s payback period?
2. What is the IRR for this project? If the required return is 11 percent, should the project be accepted based on the IRR decision rule?
3. If the required return is 11 percent, what is the NPV for this project? Should the project be accepted based on the NPV decision rule?

1. Suppose today a one year ZCB is priced at 0.97, a two year ZCB is priced at 0.95 and a three year ZCB is priced at 0.92. What is the implied forward rate for a one year loan starting one year from now? What is the implied forward rate for a one year loan starting two years from now?

2. Suppose the same info as in question 1. Suppose you wanted to lend $1 at the end of year 1 for two years, so that the loan matured at the end of year 3. Describe how you would buy and sell the ZCBs to accomplish this goal, and the amount of money that you would collect when the loan matured.

Please answer question 2

3.

A What was the real rate of return over the past year (from one year ago to today) for a stock if the inflation rate over the past year was 4.57 percent, the risk-free return over the past year was 6.99 percent, the stock is currently priced at 78.89 dollars, the stock was priced at 71.24 dollars 1 year ago, and the stock just paid a dividend of 2.47 dollars? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

B. Over the past year (from one year ago to today), the inflation rate was 4.13%, the risk-free rate was 6.08%, and the real rate of return for a bond was 3.17%. The bond is currently priced at $974.00, pays annual coupons of $84.70, and just made a coupon payment. What was the price of the bond one year ago

C Over the past year (from 1 year ago to today), the inflation rate was 6.09 percent, the risk-free rate was 8.98 percent, and the real rate of return for a bond was 8.62 percent. The bond was priced at 1,288.18 dollars one year ago and 1,316.75 dollars two years ago, pays annual coupons of 55.58 dollars, and just made a coupon payment. What is the price of the bond today?

1. The 25 year old invests $2,000 a year until the age of 65
The 35 year old invests $2,000 a year until the age of 65

We’ll assume they both get the same rate of return on their dollar, in this example we’ll use 8%. Where will each of them be when they reach the age of 65? What is the difference in the two investment choice? Place the difference between the two $ amounts as your final answer. use two decimals

2.

Find the NPV  of the following cash flows.  The cost of capital is 10%.

Period                          0             1                   2                      3                      4                      

Cash Flow         - $80,000       $15,000    $10,000        $40,000           $40,000        

Indicate if you get a negative cash flow with a - sign.

3.You bought a $400k condo. You got a 15-year fixed-rate mortgage and made a 20% down payment. Your interest rate is 5% annually. What is your monthly payment?

1.) You plan to deposit $1,000 in Year 1, $1,200 in Year 2 and $2,000 in year 4 in your savings account. You think that you can earn 6% per year. How much will you have in your account in Year 6?

2.) Bank X promises to pay you $5,200 per year for 8 years, whereas Bank Y offers to pay you $7,300 per year for 5 years.

a) Which of these cash flow streams has the higher present value (PV) if the discount rate is 5 percent? (Hint: compare the PVs of annuity X ($5,200 per year for 8 years) with annuity B ($7,300 per year for 5 years)

b) Which one should you choose between Bank X and Bank Y?

3.) Today, Dinero Bank offers you a $60,000, five-year term loan at 7.5 percent annual interest (APR). What will your annual loan payment be? (Hint: Find PMT)

4.) You buy an annuity that will pay you $24,000 a year for 25 years. The payments are paid on the first day of each year. What is the value of this annuity today if the discount rate is 8.5 percent? (Hint: annuity due)

SHOW HOW YOU GOT ANSWERS PLEASE!!