Mr. and Mrs. Rath invested in a business that will generate the followingcash flows over a three-year period. Use Appendix A.Taxable revenueDeductible expensesIf the Raths' marginal tax rate over thethree year period is 25% and they use a5% discount rate, compute the NPV ofthe transaction.O $48,750O $45,589O $65,000None of the above.Year O25,000(15,000)Year 135,000(15,000)Year 255,000(20,000)

NPV - Net present Value is the capital budgeting technique which helps to determine the…

Answered: Mr. and Mrs. Rath invested in a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Parry Corp. acquired new equipment for $2,400,000 in 20X6. For accounting purposes, the equipment will be depreciated over five years, straight-line, with a full year’s depreciation in the first year. For income tax purposes, Parry can take CCA over the next three years of $180,000 in 20X6, $324,000 in 20X7, and $261,000 in 20X8. Parry’s income tax rate is 34%.Required:For each 31 December 20X6 through 20X8, determine: (Enter your answers in thousands to two decimal places.)1. The tax basis for the equipment. 2. The accounting basis for the equipment. 3. The cumulative amount of the temporary difference relating to the equipment. 4. The balance of deferred income tax asset or liability that would be reported on the statement of financial position. 5. The amount of the deferred income tax adjustment.
The executor of Rose Shield's estate listed the following properties (at fair value): $ 350,000 250,000 150,000 Cash Life insurance receivable Investments in stocks and bonds Rental property 100,000 180,000 Personal property Following are the transactions that occur in the months following the decedent's death: 1. Claims of $90,000 are made against the estate for various debts incurred before the decedent's death. 2. Interest of $22,000 is received from bonds held by the estate. Of this amount, $4,000 had been earned prior to death. 3. Ordinary repairs costing $11,000 are made to the rental property. 4. All debts ($90,000) are paid. 5. Stocks recorded in the estate at $21,000 are sold for $29,000 cash. 6. Rental income of $24,000 is collected. Of this amount, $7,000 had been earned prior to the decedent's death. 7. Cash of $7,000 is distributed to Jim Arness, an income beneficiary. 8. The proceeds from the life insurance policy are collected and the money is immediately distributed to…
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4. The following information pertains to Our Company's self-constructed building project Our Company is building a project for its own use. We have been asked to calculate the amount of interest to be capitalized. 2021 Payments: 1/31/21 2/28/21 Specific construction debt: $900,000, 4%, 5-year note, dated 12/31/20, interest paid annually on 12/31 415,000 500,000 6/1/21 860,000 12/1/21 725,000 Other debt: 2,500,000 $825,000, 5%, annual interest paid 12/31, dated 12/31/20 $1,250,000, 7%, 10 year bonds, dated 12/31/17, interest paid 12/31 How much is the weighted average of the accumulated expenditures? b. How much is the weighted average of the interest rates on other debt? c. How much is the avoidable interest? d. How much is the actual interest? e. How much is recorded as the interest expense? f. How much interest should be capitalized? a.
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On October 1, Kingbird Corporation donated a parcel of land which had a fair market value of 9,000. King had purchased the land 5-years ago for 6,500. During the current year, Kingbird Corporation had the following income and expense items: Required: Determine Kingbird’s charitable contribution deduction for the current year
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Mr. and Mrs. Rath invested in a business that will generate the following cash flows over a three-year period. Use Appendix A. Taxable revenue Deductible expenses Year O 25,000 (15,000) Year 1 35,000 (15,000) Year 2 55,000 (20,000)