Colsen Communications is trying to estimate the first-year net operating cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project:
| Sales revenues | $5 million |
| Operating costs (excluding depreciation) | 3.5 million |
| Depreciation | 1 million |
| Interest expense | 1 million |
The company has a 40% tax rate, and its WACC is 10%.
Write out your answers completely. For example, 13 million should be entered as 13,000,000.
In: Finance
Suppose that Ramos contributes $5500/year into a traditional IRA earning interest at the rate of 5%/year compounded annually, every year after age 37 until his retirement at age 67. At the same time, his wife Vanessa deposits $3850/year (the amount after paying taxes at the rate of 30%) into a Roth IRA earning interest at the same rate as that of Ramos. Suppose that Ramos withdraws his investment upon retirement at age 67 and that his investment is then taxed at 30%. (Round your answers to the nearest cent.)
(a)How much will Ramos's investment be worth (after taxes) at that time?
(b)How much will Vanessa's investment be worth at that time?
In: Accounting
The yield on 1 year treasury securities is 7.25%, 2 year securities yield 7.3%, and 3 year securities yield 7.5%. There is no maturity risk premium. Using expectations theory, forecast the yields on the following securities:
(a) A 1-year security, 1 year from now
(b) A 1-year security, 2 years from now
(c) A 2-year security, 1 year from now
In: Finance
An asset used in a 4-year project falls in the 5-year MACRS class (refer to MACRS table on page 277), for tax purposes. The asset has an acquisition cost of $15,535,460 and will be sold for $5,328,631 at the end of the project. If the tax rate is 0.39, what is the aftertax salvage value of the asset (SVNOT)?
In: Finance
Jack is the only shareholder of XYZ Corporation. At year-end, XYZ had $200 of current year earnings and profits and $600 of accumulated earnings and profits. If XYZ distributes cash of $200 to Jack, what is Jack’s tax liability on the dividend, if any? Assume Jack has a basis of $10 in XYZ shares. How does this result change if XYZ only has $50 of current earnings and profits and $100 of accumulated earnings and profits?
Clearly identify the requirements being addressed. Show all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that the thought process can be examined. Make effective use of comments to convey your thought process as well. No hard coding of solutions. Submit a single MS Excel file for grading.
In: Accounting
An asset used in a 4-year project falls in the 5-year MACRS class (refer to MACRS table on page 277), for tax purposes. The asset has an acquisition cost of $22,437,430 and will be sold for $5,064,805 at the end of the project. If the tax rate is 0.39, what is the aftertax salvage value of the asset (SVNOT)?
In: Finance
Colsen Communications is trying to estimate the first-year net operating cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project:
| Sales revenues | $25 million |
| Operating costs (excluding depreciation) | 17.5 million |
| Depreciation | 5 million |
| Interest expense | 5 million |
The company has a 40% tax rate, and its WACC is 14%.
Write out your answers completely. For example, 13 million should be entered as 13,000,000.
In: Finance
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An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $8,400,000 and will be sold for $2,040,000 at the end of the project. If the tax rate is 23 percent, what is the aftertax salvage value of the asset? Refer to (MACRS schedule) (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number. |
In: Finance
An investment will pay $150 at the end of each of the next 3 years, $200 at the end of year 4, $350 at the end of year 5, and $550 at the end of year 6. If other investments of equal risk earn 9% annually, what is the present value? Its future value? Do not round intermediate calculations. round your answers to the nearest cent.
In: Finance
Jake inherits a perpetuity that will pay him $10,000 at the end of the first year increasing by
$10,000 per year until a payment of $150,000 is made at the end of the fifteen year. Payments
remain level after the fifteenth year at $150,000 per year. Determine the present value of this
perpetuity, assuming a 7.5% annual interest rate.
In: Finance