Loose Leaf for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
10th Edition
ISBN: 9781260189728
Author: Brian C. Spilker Professor, Benjamin C. Ayers, John Robinson Professor, Edmund Outslay Professor, Ronald G. Worsham Associate Professor, John A. Barrick Assistant Professor, Connie Weaver
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
thumb_up100%
Chapter 1, Problem 42P
Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Inc. that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda’s marginal tax rate is 25 percent.
- a) What is her after-tax
rate of return for the City of Heflin bond? - b) How much explicit tax does Melinda pay on the City of Heflin bond?
- c) How much implicit tax does she pay on the City of Heflin bond?
- d) How much explicit tax would she have paid on the Surething Inc. bond?
- e) What is her after-tax rate of return on the Surething Inc. bond?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Inc. that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda's marginal tax rate is 25 percent.
a) What is her after-tax rate of return for the City of Heflin bond?
b) How much explicit tax does Melinda pay on the City of Heflin bond?
c) How much implicit tax does she pay on the City Heflin bond?
d) How much explicit tax would she have paid on the Surething, Inc. bond?
e) What is her after-tax rate of return on the Surething Inc. bond?
Melinda invests $330,000 in a City of Heflin bond that pays 4.8 percent interest. Melinda could have invested the $330,000 in a bond recently issued by surething incorporated that pays 8 percent interest and has risk and other characteristics similar to the city of Heflin bond. Assume Melinda’s marginal tax rate is 40 percent.
A. What is her after tax rate of return for the city of Heflin bond?
B. How much explicit tax does Melinda pay on the city of Heflin bond?
C. How much implicit tax does she pay on the city of Heflin bond?
D. How much explicit tax would she have to paid on the sure thing incorporated bond?
E. What is her after tax of return on the sure thing incorporated bond?
Melinda invests $220,000 in a City of Heflin bond that pays 6.8 percent interest. Alternatively, Melinda could have invested the $220,000 in a bond recently issued by Surething Incorporated that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda's marginal tax rate is 15 percent.
Note: Leave no cells blank - be sure to enter "0" wherever required. Round your after-tax rate of return to one decimal place.
Required:1.What is her after-tax rate of return for the City of Heflin bond?2.How much explicit tax does Melinda pay on the City of Heflin bond?3.How much implicit tax does she pay on the City of Heflin bond?4.How much explicit tax would she have paid on the Surething Incorporated bond?5.What is her after-tax rate of return on the Surething Incorporated bond?a. After-tax rate of return ___% ?
b. Explicit tax ___ ?
c. Implicit tax __?
d. Explicit tax __?
e. After-tax rate of return ___% ?
Chapter 1 Solutions
Loose Leaf for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
Ch. 1 - Prob. 1DQCh. 1 - Prob. 2DQCh. 1 - Prob. 3DQCh. 1 - Courtney recently received a speeding ticket on...Ch. 1 - Prob. 5DQCh. 1 - To help pay for the citys new stadium, the city of...Ch. 1 - Prob. 7DQCh. 1 - If the general objective of our tax system is to...Ch. 1 - One common argument for imposing so-called sin...Ch. 1 - Prob. 10DQ
Ch. 1 - Describe the three different tax rates discussed...Ch. 1 - Which is a more appropriate tax rate to use to...Ch. 1 - Describe the differences between proportional,...Ch. 1 - Arnold and Lilly recently had a heated discussion...Ch. 1 - Which is the largest tax collected by the U.S....Ch. 1 - Prob. 16DQCh. 1 - Prob. 17DQCh. 1 - Prob. 18DQCh. 1 - Prob. 19DQCh. 1 - Prob. 20DQCh. 1 - What is the difference between a sales tax and a...Ch. 1 - What is an ad valorem tax? Name an example of this...Ch. 1 - Prob. 23DQCh. 1 - Prob. 24DQCh. 1 - Prob. 25DQCh. 1 - Kobe strongly dislikes SUVs and is appalled that...Ch. 1 - Prob. 27DQCh. 1 - What is the difference between horizontal and...Ch. 1 - Montel argues that a flat income tax rate system...Ch. 1 - Discuss why evaluating vertical equity simply...Ch. 1 - Prob. 31DQCh. 1 - Many years ago a famous member of Congress...Ch. 1 - Prob. 33DQCh. 1 - Prob. 34PCh. 1 - Prob. 35PCh. 1 - Prob. 36PCh. 1 - Prob. 37PCh. 1 - Prob. 38PCh. 1 - Prob. 39PCh. 1 - Prob. 40PCh. 1 - Prob. 41PCh. 1 - Melinda invests 200,000 in a City of Heflin bond...Ch. 1 - Hugh has the choice between investing in a City of...Ch. 1 - Using the facts in problem 43, what interest rate...Ch. 1 - Fergie has the choice between investing in a State...Ch. 1 - Prob. 46PCh. 1 - Given the following tax structure, what minimum...Ch. 1 - Using the facts in problem 47, what minimum tax...Ch. 1 - Song earns 100,000 taxable income as an interior...Ch. 1 - Prob. 50PCh. 1 - Prob. 51PCh. 1 - Using the facts in problem 51, what is the minimum...Ch. 1 - Using the facts in problem 51, what is the minimum...Ch. 1 - Prob. 54PCh. 1 - Consider the following tax rate structure. Is it...Ch. 1 - Consider the following tax rate structure. Is it...Ch. 1 - Prob. 57PCh. 1 - Prob. 58PCh. 1 - Using the Internet, find a comparison of income...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Plantwide and Departmental Overhead Allocation; Activity-Based Costing; Segmented Income Statements Koontz Comp...
Introduction To Managerial Accounting
List five asset accounts, three liability accounts, and five expense accounts included in the acquisition and p...
Auditing and Assurance Services (16th Edition)
BE1-7 Indicate which statement you would examine to find each of the following items: income statement (IS), ba...
Financial Accounting: Tools for Business Decision Making, 8th Edition
Place the letter of the appropriate accounting cost in Column 2 in the blank next to each decision category in ...
Fundamentals Of Cost Accounting (6th Edition)
This year, Prewer Inc. received a 160,000 dividend on its investment consisting of 16 percent of the outstandin...
PRINCIPLES OF TAXATION F/BUS.+INVEST.
Assume you are a CFO of a company that is attempting to race additional capital to finance an expansion of its ...
Financial Accounting, Student Value Edition (4th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Incorporated that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda’s marginal tax rate is 25 percent. How much explicit tax would she have paid on the Surething Incorporated bond? What is her after-tax rate of return on the Surething Incorporated bond?arrow_forwardStacey faces a 15% tax rate on interest income. She can buy a $100 face value corporate bond yielding 12.5% ($12.5) annually for $100 or a municipal bond yielding $12.5 annually. Both bond issues have similar maturities and risk. How much is she willing to pay for the municipal bond?arrow_forwardSuppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. Which one of the followings is likely to be the best investmentinyour 401 (k) account? _____ a. Municipal bonds b. 1-year Treasury notes c. Stock mutual funds d .Annuitiesarrow_forward
- Anastasia wants to invest $1.5M. Based on her income she is currently in the 33% tax bracket for ordinary income and in the 15% bracket for long-term capital gains. Her tax brackets for state income tax purposes are 7% and 0% on long-term capital gains. Consider the following situations: Situation 2 Situation 2 Corporate Municipal Type Bonds Bonds Time horizon 5 years 7 years 11% interest 6.5% interest Income annually annually Discount rate 5.5% 5% Repayment/Sale Repaid after 5 Repaid after years 7 years Taxable at Not taxable for federal ordinary Comments income tax rates; no state income tax but state income tax of 7% applies income tax Requirements: Determine the net present value of the after-tax cash flow for: (1) Situation 1: (2) Situation 2:arrow_forwardFergie has the choice between investing in a State of New York bond at 5 percent and a Surething Inc. bond at 8 percent. Assuming that both bonds have the same nontax characteristics, and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?arrow_forwardA taxpayer is trying to decide between two investments: a State of Vermont bond that will pay 3.20% interest annually or preferred corporate stock that will pay 3.75% dividends annually. What tax-related factors should the taxpayer consider in making their investment decision?arrow_forward
- Taxpayer Y, who has a 30 percent marginal tax rate, invested $65,000 in a bond that pays 8 percent annual interest. Compute Y’s annual net cash flow from this investment assuming that a. The interest is tax-exempt income.b. The interest is taxable income.arrow_forwardSuppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. Which of the following strategies is most tax efficient for your situation? ______ a.Invest all your income inside your regular taxable investment account. b.First, fully fund your 401 (k) account, then invest the rest in the IRA and Roth IRA account, finally invest the remaining money, if any,in your regular taxable investment account. c.Fully fund your 401 (k) account, and then invest all the rest money in your regular taxable investment account. d.First, fully fund your IRA and Roth IRA account, then fund your401 (k) account, finally invest the remaining money, if any, in your regular taxable investment account.arrow_forwardJackson has the choice to invest in city of Mitchell bonds or Sundial, Incorporated corporate bonds that pay 10 percent interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city of Mitchell bonds and the Sundial, Incorporated bonds have similar risk. you advise Assume the original facts as given except that Jackson is a head of household taxpayer and the city of Mitchell pays interest of 8 percent. How would Jackson to invest his money? Multiple Choice Invest in Sundial, Incorporated bonds because their explicit tax is greater than the implicit tax on city of Mitchell bonds. Invest in city of Mitchell bonds because their implicit tax is greater than the explicit tax on Sundial, Incorporated bonds. Invest in Sundial, Incorporated bonds because their explicit tax is less than the implicit tax on city of Mitchell bonds. Invest in city of Mitchell bonds because their implicit tax is less than the explicit tax on Sundial, Incorporated bonds.arrow_forward
- Hugh has the choice between investing in s City of Heflin bond at 6 percent or investment in Surething, Inc. bond at 9 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, in which bond should he invest?arrow_forwardAnita Anderson owns tax-free bonds valued at $12,000, which is 23% of her total investments. What is the value of her total investments? Round to the nearest dollar.arrow_forwardHugh has the choice between Investing in a City of Heflin bond at 6.5 percent or Investing in a Surething Incorporated bond at 9.5 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, in which bond should he invest? Hugh should invest in the MITCASEarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
How to (Legally) Never Pay Taxes Again; Author: Next Level Life;https://www.youtube.com/watch?v=q63F1pBrUHA;License: Standard Youtube License