Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

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Answer 1

Question

Chapter 12, Problem 13AP

a.

To determine

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

b.

To determine

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

c.

To determine

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

d.

To determine

Explain the impact on Corporation A, Corporation B and Mr. F.

e.

To determine

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

f.

To determine

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

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Answer 2

Question

Chapter 12, Problem 13AP

a.

To determine

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

b.

To determine

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

c.

To determine

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

d.

To determine

Explain the impact on Corporation A, Corporation B and Mr. F.

e.

To determine

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

f.

To determine

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

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Answer 3

Question

Chapter 12, Problem 13AP

a.

To determine

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

b.

To determine

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

c.

To determine

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

d.

To determine

Explain the impact on Corporation A, Corporation B and Mr. F.

e.

To determine

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

f.

To determine

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

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Answer 4

Question

Chapter 12, Problem 13AP

a.

To determine

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

b.

To determine

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

c.

To determine

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

d.

To determine

Explain the impact on Corporation A, Corporation B and Mr. F.

e.

To determine

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

f.

To determine

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

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Answer 5

Chapter 12, Problem 13AP

a.

To determine

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

b.

To determine

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

c.

To determine

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

d.

To determine

Explain the impact on Corporation A, Corporation B and Mr. F.

e.

To determine

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

f.

To determine

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

Answer 6

Chapter 12, Problem 13AP

a.

To determine

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

Answer 7

Chapter 12, Problem 13AP

a.

To determine

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

Answer 8

b.

To determine

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

Answer 9

b.

To determine

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

Answer 10

c.

To determine

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

Answer 11

c.

To determine

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

Answer 12

d.

To determine

Explain the impact on Corporation A, Corporation B and Mr. F.

Answer 13

d.

To determine

Explain the impact on Corporation A, Corporation B and Mr. F.

Answer 14

e.

To determine

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

Answer 15

e.

To determine

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

Answer 16

f.

To determine

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

Answer 17

f.

To determine

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

Answer 18

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Answer 19

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Answer 20

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Answer 21

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Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

Compute the Corporation A’s tax savings from the deduction of the interest payments and the after-tax cost.

Compute the Corporation B’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

Compute the Mr. F’s tax cost and after-tax earnings from its receipt of interest income from Corporation A’s.

Explain the impact on Corporation A, Corporation B and Mr. F.

Recompute the Corporation B’s tax cost and after-tax assuming the receipt of interest from Corporation A’s is treated as constructive dividend.

Recompute Mr. F’s tax cost and after-tax earnings by assuming that the receipt of interest from Corporation A is treated as the constructive dividend.

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