C Harvey quit his job at State Universitywhere he earned $45,000 a year. Hefigures his entrepreneurial talent orforegone entrepreneurial income to be$5,000 a year. To start the business, hecashed in $100,000 in bonds that earned10 percent interest annually to buy asoftware company, Extreme Gaming. In thefirst year, the firm sold 11,000 units ofsoftware at $75 for each unit. Of the $75per unit, $55 goes for the costs ofproduction, packaging, marketing,employee wages and benefits, and rent ona building.Refer to the above information. The cost ofcapital for Harvey in the first year is:Group of answer choicesA) $10,000B) Not enough informationC) $110,000D) $100,000E) There is $0 cost of capital associatedwith Harvey's new business

Cost of capital is amount you paid using the money.

Answered: Harvey quit his job at State University…

Harvey quit his job at State University where he earned $45,000 a year. He Figures his entrepreneurial talent or Foregone entrepreneurial income to be Vear To start the b ucinecc be

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter15: Taxing Business Income

Section: Chapter Questions

Problem 3DQ

See similar textbooks

Related questions

Q: Do question 6

A: Balance sheet is a type of financial statements that show the financial balances of any company at…

Q: Ihshl

A: The Fundamental accounting equation, likewise called the accounting report condition, speaks to the…

Q: What the agi

A: AGI means Adjusted Gross Income. It is the total income on which income tax payable would be…

Q: F, G, H

A: f. Receipt of interest income accrued at the end of prior month would include increase in cash and a…

Q: 1. Why is there a cost associated with retained earnings? 2. What is Coleman's estimated cost of…

A: Given: The firm tax rate is 25% The current price of coleman’s is 12% The current price of firm is…

Q: D nctions Question 10 Use the diagram below to find each of the following: sine of point a • cose of…

A: Refer to the attached image for the detailed solution:

Q: how do you record line i

A: An accounting equation is a formula of accounting where it is proved that the total value of assets…

Q: excel

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Harvey quit his job at State University
where he earned $45,000 a year. He
figures his entrepreneurial talent or
foregone entrepreneurial income to be
$5,000 a year. To start the business, he
cashed in $100,000 in bonds that earned
10 percent interest annually to buy a
software company, Extreme Gaming. In the
first year, the firm sold 11,000 units of
software at $75 for each unit. Of the $75
per unit, $55 goes for the costs of
production, packaging, marketing,
employee wages and benefits, and rent on
a building.
Refer to the above information. The cost of
capital for Harvey in the first year is:
Group of answer choices
A) $10,000
B) Not enough information
C) $110,000
D) $100,000
E) There is $0 cost of capital associated
with Harvey's new business

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Harvey quit his job where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The total revenues for the firm in the first year were: Multiple Choice O $605,000 $825.000 $50,000 $100,000 O
Sarah and James Hernandez purchased 160 shares of Cisco Systems stock at $20 a share. One year later, they sold the stock for $26.40 a share. They paid a broker $22 commission when they purchased the stock and a $30 commission when they sold the stock. During the twelve month period they owned the stock, Cisco Systems paid dividends that totaled $0.24 per share. Calculate the Hernandez’s total return for this investment.
Stuart daniels estimates that he will need $22,000 to set up small business in 8 years. a) how much ( in $) must stuart invest now at 8% interest compound quartely to achieve his goal ? b) how much compound interest ( in $) will he earn on the investment.
Dean and his sister decide to begin a gardening business and will need $4000. To do so, Dean invests $800 compounded quarterly at 10% and Susan invests $1000 compounded semi-annually at 8%. How many years will it take them to accumulate the money needed for the business?
Sammy purchased 800 shares of Winn-Dixie at $4.40 per share. Sammy financed 35% of the purchase with a call loan that had a 9% rate and required annual interest payments. Sammy sold the shares two years later at $6.25 per share and repaid the loan. Sammy paid his broker $80 per transaction. What annual return did Sammy earn?
Steven invested the profit of his business in an investment fund that was earning 3.50% compounded monthly. He began withdrawing $2,500 from this fund every 6 months, with the first withdrawal in 3 years. If the money in the fund lasted for the next 4 years, how much money did he initially invest in the fund? $ Round to the nearest cent.
Sarah and James Hernandez purchased 320 shares of Macy’s stock at $15 a share. One year later, they sold the stock for $35.00 a share. They paid a broker a commission of $7 when they purchased the stock and a commission of $11 when they sold the stock. During the 12-month period the couple owned the stock, Macy’s paid dividends that totaled $2.05 a share. Calculate the Hernandezes’ total return for this investment. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Brianna invested the profit of his business in an investment fund that was earning 3.75% compounded monthly. In 4 years, he began withdrawing $4,000 from this fund at the end of every 6 months. If the money in the fund lasted for the next 5 years, how much money did he initially invest in the fund? $ Round to the nearest cent
Rachel owns 100 percent of a gift shop with an equity value of $150,000. If she keeps the shop open 5 days a week, EBIT is $75,000. If the shop remains open 6 days a week, EBIT increases to $92,000 annually. Rachel needs an additional $50,000 which she can raise today by either selling stock or issuing debt at an interest rate of 7 percent. The principal amount would be repaid in equal annual payments at the end of the next five years. Ignore taxes. What will be the cash flow for the year to Rachel if she issues debt, remains open 5 days a week, and distributes all the residual cash flow to the shareholders? Multiple Choice $46,125 $61,500 $65,000 $71,500 $67,880
Wu of Troy, New York, has $5,000 that he wants to invest in the stock market. Ji is in college on a scholarship and does not plan to use the $5,000 or any dividend income for another five years, when he plans to buy a home. He is currently considering a small company stock selling for $25 per share with an EPS of $1.25. Last year, the company earned $900,000, of which $250,000 was paid out in dividends. 1, What classification of common stock would you recommend to Ji? 2, Calculate the P/E ratio and the dividend payout ratio for this stock. Round your answers to the nearest whole number. 3, Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?
Sarah and James Hernandez purchased 140 shares of Macy's stock at $57 a share. One year later, they sold the stock for $61 a share. They paid a broker a commision of $8 when they purchased the stock and a commision of $12 when they sold the stock. During the 12-month period the couple owned the stock, Macy's paid dividends that totaled $1.00. Calculate the Hernandezes' total return for this investment.
Mario earned $12,000 last year giving tennis lessons. He invested part of the money at 3% simple interest and the rest at 4%. In one year, he earned a total of $440 in interest. How much did he invest at each rate?