Scenario 1: Leo is the sole owner of Leo Construction, a proprietorship whose profit was $500,000 for 2017, he had income of $10,000 from interest generated by his personal bank savings

Scenario 2: Leo and four nephews have equal ownership rights in a partnership called Leo and Nephews Construction Company. The company had a profit of $500,000 for 2017, and each of the five partners received $2,000 in interest income.

Scenario 3: Leo and his four nephews decide to incorporate their company as Leo Associates, Inc. In 2017, the corporation earnings before income taxes was $500,000 and all after-tax profit was distributed as dividends to the five shareholders, each one receiving the same amount. Also each of the five stakeholders received $2,000 in interest income.

(1) For the above three scenarios, assuming Leo and his four nephews are all married and filing jointly with no dependent children, and there is no other deductions. For each scenario: (a) How much federal income tax each individual should pay? (b) How much income tax the IRS would receive in total?

1. Read the following scenario and answer the question in 5-10 sentences.

You are the president of the American Construction Company (ACC), a company that contracts with builders to use its heavy construction equipment to move large items in to place for the building of commercial buildings (cranes to move large pieces of building frames, large furnaces or air conditioners, etc.). You typically buy your cranes and other equipment on credit and so have monthly payments for that equipment. You cover your costs and make some profit through the rental fees you charge the builders. There are two other companies in town that own equipment similar to ACC equipment and compete with you for contracts. In a meeting of your executive team, one of the members suggests that you do an extended "discount period" where you will price the rental of your equipment significantly below your monthly payments on the equipment to increase business. The suggestion is that once you have captured the business, you can then raise your prices slowly until you above your current price. Discuss this suggestion.

Building of its reputation for manufacturing no-thrills, efficient and affordable automobiles, the Indian car manufacturers Indy Car Limited, is ready to launch an international marketing campaign, specifically targeting low- to- medium income customers in Asia and Europe. In preparation for the expected demand increase, a new production facility will be added in the state of Andhra Pradesh near Hyderabad to complement the already existing plants in Mumbai and New Delhi. The Company’s CFO, Raja Jain is planning to raise the required funds of Indian Rupees 10 billion ($222.4 million) in the form of a 20- year annual coupon paying corporate bond. The company’s current debt rating with Standard & Poor is “A” with a positive outlook, indicating the likelihood of a rating upgrade to “AA” in the near future. In that case, the market’s required rate of return could drop by as much as 75 basis points from 6.80 percent to 6.05 percent. Mr. Jain is wondering if the bond should be issued at a premium or a discount and if the company should offer a fixed or floating rate or instead of making explicit interest payments, issue a zero- coupon bond instead. Each bond will have a nominal value of Rs. 1,000. The intended issue date is 1st July 2019. You are required to: Q1. Advise Mr. Jain on the impact of the following set of bond features and characteristics on the cost of debts: sinking fund, asset backing, seniority conversion feature, differed call and make whole call provision, a put provision, and a floating rate as well as positive & a negative covenants. Q2. Compute the expected issue price based on the required rate of return of 6.8 percent for: (a). A fixed annual interest payment of Rs 64 per bond. (b). A fixed annual interest payment of Rs 72 per bond. (c). does your answer of (a) and (b) change if semi annual interest payments of Rs 32 and Rs 36 respectively, are made? If so why? (d). a zero- coupon bond Q3. Recompute your results of 2 (a), (b) and (d), assuming an upgrade in the company’s credit rating and determine the impact on the expected issue price. Q4. Explain to Mr. Jain if an affluent investor would rather buy a premium or a discount bond.

Assume JP Morgan has a choice between two deposit accounts.

Account A has an annual percentage rate of 7.55 percent but with interest compounded monthly.

Account B has an annual percentage rate of 7.45 percent with interest compounded quarterly.

Which account provides the highest effective annual return?

The amount of the monthly income benefit a policyowner receives under a disability income benefit is typically expressed as a

A hospital director is told that 57% of the emergency room visitors are insured. The director wants to test the claim that the percentage of insured patients is less than the expected percentage. A sample of 220 patients found that 110 were insured. Determine the P-value of the test statistic. Round your answer to four decimal places.

Springfield Co., based in the U.S., has customers in London, England that uses the British Pound Sterling as its currency. Name and discuss the technique that the firm can use to determine whether the quarterly percentage change in its total cash flow is related to the quarterly percentage change in the British Pound Sterling's value.

A controversial topic in Spring 2020 is a national debate concerning whether Americans should be legally required to "shelter in place" during the virus epidemic. How many Americans should be polled to determine the percentage of all Americans who agree with the legal requirement correct to within 6 percentage points with 99% confidence?