The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 9 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 15 percent higher, that is, firms that paid 11 percent for debt last year will be paying 12.65 percent this year. a. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on Its cost last year and the 15 percent increase? Note: Do not round Intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Aftertax cost of debt % b. If the receipts of the foundation were found to be taxable by the IRS (at a rate of 35 percent because of involvement in political activities), what would the aftertax cost of debt be? Note: Do not round Intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Aftertax cost of debt %

The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 9 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 15 percent higher, that is, firms that paid 11 percent for debt last year will be paying 12.65 percent this year. a. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on Its cost last year and the 15 percent increase? Note: Do not round Intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Aftertax cost of debt % b. If the receipts of the foundation were found to be taxable by the IRS (at a rate of 35 percent because of involvement in political activities), what would the aftertax cost of debt be? Note: Do not round Intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Aftertax cost of debt %

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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A college student is reported in the newspaper as having won $10,000,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $10 million now. Instead she will receive $500,000 at the end of the year for each of the next 20 years. If the annual interest rate is 6%, what is the present value (today’s amount) that she won? (Ignore taxes.)
Y University received a contribution to its endowment fund of $ 5 million. It can never touch the principal but can use the earnings. At an interest rate of 5 percent, how much can the college earn to help its operations each year?
The State of Texas has a pension fund liability of $25 million, due in 10 years. Each year the legislature is supposed to set aside an annuity to arrive at this future value. This annuity is based on what the legislature believes it can earn on this money. Estimate the annuity needed each year for the next 10 years, assuming that the interest rate that can be earned on the money is 6%. $1,896,699 $3,657,129 $6,687,085 $4,675,987
ss
please tell me which is the best option and formulate why, thanks
The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenue-producing investments together with annual rates of return are as follows: Type of Loan/Investment Annual Rate of Return (%) Automobile loans 8 Furniture loans 10 Other secured loans 11 Signature loans 12 Risk-free securities 9 The credit union will have $2 million available for investment during the coming year. State laws and credit union policies impose the following restrictions on the composition of the loans and investments: • Risk-free securities may not exceed 25% of the total funds available for investment. • Signature loans may not exceed 11% of the funds invested in all loans (automobile, furniture, other secured, and signature loans). • Furniture loans plus other secured loans may not exceed…
Wolfson Corporation has decided to purchase a new machine that costs $3.6 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 24 percent. The Sur Bank has offered Wolfson a four-year loan for $3.6 million. The repayment schedule is four yearly principal repayments of $900,000 and an interest charge of 7 percent on the outstanding balance of the loan at the beginning of each year. Both principal repayments and interest are due at the end of each year. Cal Leasing Corporation offers to lease the same machine to Wolfson. Lease payments of $1,020,000 per year are due at the beginning of each of the four years of the lease. a. What is the NAL of leasing for Wolfson? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) b. What is the maximum annual lease…
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Please answer the following showing detailed working: Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information; a) Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000.00 Cost of debts 11% cost of equity when unlevered 18% Tax rate 31% Debts $0 $10,000.00 $20,000.00 $30,000.00 Cost of Equity when levered Equity D/E Vu VL WACC b) Plot the results from the table into the following two graphs:i) Value of the firm vis-à-vis- Total debtii) Cost of capital of the firm vis-à-vis D/E ratio.iii) Which MM propositions have you demonstrated?
You've just been hired by RhombiData. The new job includes company contributions to a qualified savings plan. RhombiData will make an annual contribution of $4,000 in Year 1 (payments are made all at once at the end of the year), but will then raise the amount it contributes by 3.0% annually for 7 years (Years 2 through 8); and then, as a loyalty incentive, will raise the annual increase to 5% annually starting with the Year 9 contribution. You anticipate that the average annual return on all contributions will be 7% compounded annually (which you also consider your discount rate). You plan to retire in 19 years, when RhombiData will have made 19 contributions-making all contributions on the last day of the year, including one on your last day of work. You know your salary amount but are trying to assess the value today of the company contributions to your savings plan. (You are excluding the value of your own savings contributions.) In today's dollars (PV), what are the nineteen (19)…
Your employer asks you to consult on the better approach to a decision. What should the corporation pay for an asset that will return them $150,000 at the end of year 1, then zero in year 2, then $400,000 in years 3 & 4, then zero in year 5, then $200,000 in years 6-10, assuming their discount rate is 3% (ignoring taxes) ?
I have a question about this assignment! Northeastern costs approximately $50,000 per year for a four-year program, whether completed in four years or five. Assume that a student’s parents realized 15 years ago that college was going to cost $50,000 per year for four years and wondered how much they would have to save each year to have the money to pay for the student’s education. The assumption is that payments are made into the college fund each year, and payments are withdrawn from the fund at the end of the relevant years.The key information for this scenario is as follows: The number of years of contributions is 18. The college payments will be made in years 15, 16, 17, and 18. The interest rate is 10 percent. College costs are $50,000 per year and are the same for each of the four years. Using the key information for the scenario above, how much would the parents have to save each year for 18 years to have exactly the amount of money needed to pay the student’s expenses?…

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