7. Comparing Taxable and Tax-Free Yields. With a 28 percent marginal tax rate, would a tax-free yield of 7 percent or a taxable yield of 9.5 percent give you a better return on your savings? Why?

Q: What is the payback if the investment is $22,000 and the after tax benefits are: Years 1 & 2 =…

A: Investment amount = $ 22,000

Q: In the next year, a company has pre-tax earnings that will either be €80 or €400 with equal…

A: Risk management refers to the strategic measures taken by the company to eliminate uncertainty in…

Q: Discuss the meaning and significance of the perpetuity growth rate in the DCF Valuation and how you…

A: Perpetuity is a very important concept in Finance and payment will be made for forever. That means…

Q: If the annual interest rate is 9% and inflation rate is 5%. What does the tax rate have to be in…

A: Real rate of return=1+annual interest rate1+Inflation rate-1=1.091.05-1=3.8%

Q: Calculate the annual tax factor benefit or savings from an annual depreciation of $20,000 if you are…

A: Annual depreciation = $ 20,000 Tax rate = 28%

Q: If there is a deflation rate of 2% and your account is earning a nominal interest rate of 1.75%,…

A: Deflation rate (d) = 2% Nominal interest rate (r) = 1.75%

Q: 2. What happens to domestic investment as the real interest rate rises? Explain your answer

A: The Federal Reserve (the Fed) has three goals: maximizing employment, maintaining price stability,…

Q: hat is the horizon value of the interest tax shield? Do not round intermediate calculations. Round…

A: Horizon value is the present value of cash flow after the constant growth have started and the…

Q: An investor owns a property that produces an NOI of $110,000 and has an annual debt service of…

A: Net Operating Income = NOI = $110,000Annual Debt Service = d = $70,000cost recovery = c =…

Q: Explain

A: 59)In finance, "IRA" stands for Individual Retirement Account. It is a type of savings account…

Q: If a firm borrows $50 million for one year at an interest rate of 9 percent, what is the present…

A: In this question first we need to calculate the interest amount. Interest amount=$50 million*9%=$4.5…

Q: A financial analyst is treating a cash flow stream as a perpetuity.  The present value of the…

A: Present Value of Perpetuity: It represents the present worth of the perpetual cash flow stream. It…

Q: Suppose you sell a fixed asset for $112,000 when its book value is $112,000. If your company's…

A: Cash flow is the movement of money in and out of a company.

Q: (Leveraged returns) You have a chance to make a $25,000 one-year investment. The invest- ment is…

A: Leverage refers to the use of debt (borrowed funds) in order to increase the potential return of an…

Q: 2. If an after-tax rate of return of 10% is required, and the effective tax rate is 30%, what is the…

A: After tax rate of return = Before tax rate of Return X (100% - tax rate)

Q: Would you rather have a 10% loan that compounds quarterly or monthly?  Explain your reasoning.

A: The real interest that an investor earns on the investment and a borrower pays on loan after…

Q: Future value refers to the worth today of some amount of money received in the future. O True False

A: Future value is defined as a technique for computing how much the present value of PV of a asset or…

Q: A firm will report annual Net Income of $50 and depreciation expense of $20 forever in the future.…

A: Tax shield refers to the reduction of tax liability due to tax allowable expenses. Tax allowable…

Q: Project B cost $4,900 and will generate after-tax net cash inflows of $400 in year one, $1,200 in…

A: Net present value is used to analyze profitability and translate future cash flows for capital…

Q: A lump-sum payment of $1,040,000 right now, in which case 45% will be deducted for taxes. We do not…

A: The current worth of the amount that can be invested further for certain period of time with given…

Q: What will the money rate of interest have to be at a 6% inflation rate to entice people to keep the…

A: given, real rate = 5% inflation= 6%

Q: Explain the concept of Tax Deduction in WACC. Does this tax deduction make debt finance Cheaper Then…

A: WACC is the weighted average cost of equity, cost of debt and cost of preference capital.

Q: 4. What role do interest rates play in allocating capital to different potential borrowers?

A: Interest rate is a percentage that represents the cost of borrowing money or the rate of return…

Q: With a 28% marginal tax rate, would a tax free yield of 7%  or taxable yeild of 9.5% give you a…

A: Hence, effective yield of 9.5% taxable yield is 6.84%.The effective yield of 9.5% taxable yield is…

Q: Golden Gate Construction Associates, a real estate developer and building contractor in San…

A: WACC or the weighted average cost of capital is the blended cost of capital.It takes into…

Q: Explain Value added Tax (VAT), using an illustrative numerical example of your own. (Use 5% for VAT…

A: Value added tax (VAT) is tax is an indirect tax which is leviable on goods. VAT is taxed at each…

Q: Suppose that you want to take out a loan and that your local bank wants to charge you an annual real…

A: Compute the nominal interest rate: Nominal interest rate is calculated by using following formula:

Q: 11. Inflation - how can inflation affect the real estate market? In what different ways?

A: Comment- We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: How long will it take for a lender to discount ₱75,000 by 11.45% in order to gain ₱10,500 as his…

A: Simple interest is simple interest without compounding of interest and in discount we use the simple…

Q: Bhupatbhai

A: The objective of this question is to calculate the tax savings generated from the depreciation of an…

Q: 9. If a firm borrows $50 million for one year at an interest rate of 9%, what is the present value…

A: Interest tax shield:  Interest expense deductions from taxable income result in lower income taxes,…

Q: TAX SAVINGS. You pay $3000 per month on your mortgage. How much additional tax savings will you…

A: Solution: Additional tax savings means the savings in tax amount due to an expense. We know,…

Q: Using loanable funds model, explain how tax cuts for businesses will impact the interest rate and…

A: If the government has announced tax cut for the business sector and it would be leading to increase…

Q: To minimize dead weight loss resulting from taxation, A.tax rates should increase in times of need…

A: Taxation can be defined as the compulsory charge being implemented by the government or the taxation…

Q: D6) If the corporate tax rate in a foreign country is 20%and the tax rate in the home country is…

A: When there is a change in tax rate then it will have to be considered as it will affect the…

Q: Hi can i calculate the value of a firm by discounting the Unlevered net incomes?

A: The DCF analysis involves projecting the firm's future unlevered net income and then discounting…

Q: What percent Americans had no savings

A: The economy might be strong in the U.S., but nearly 70 percent of Americans have less than $1,000…