whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes . Introduction: Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

Question

The Short-Line Railroad is considering a $140,000 investment in either of two companies. The cash flows are as follows: Year Electric Co. Water Works 1.................. $85,000 $30,0002.................. 25,000 25,0003.................. 30,000 85,0004–10 ............ 10,000 10,000a. Using the payback method, what will the decision be? b. Using the Net Present Value method, which is the better project? The discount rate is 10%.

Answer 1

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 14, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

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The Short-Line Railroad is considering a $140,000 investment in either of two companies. The cash flows are as follows: Year Electric Co. Water Works 1.................. $85,000 $30,0002.................. 25,000 25,0003.................. 30,000 85,0004–10 ............ 10,000 10,000a. Using the payback method, what will the decision be? b. Using the Net Present Value method, which is the better project? The discount rate is 10%.

Skyline Corp. will invest $130,000 in a project that will not begin to produce returns until after the 3rd year. From the end of the 3rd year until the end of the 12th year (10 periods), the annual cash flow will be $34,000. If the cost of capital is 12 percent, should this project be undertaken?

Which of the following would hurt your credit score? Closing a long-held credit card account. Paying off student loan debt. Getting married

Answer 2

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 14, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

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Answer 3

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 14, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

Expert Solution & Answer

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Answer 4

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 14, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

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Answer 5

Chapter 14, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

Answer 6

Chapter 14, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

Answer 7

Chapter 14, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

Answer 8

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

Answer 9

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

Answer 10

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

Answer 11

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

Answer 12

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

Answer 13

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

Answer 14

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

Answer 15

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

Answer 16

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

Answer 17

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

Answer 18

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Answer 29

Ch. 14 - Prob. 1Q Ch. 14 - Prob. 2Q Ch. 14 - Would it ever be rational for a firm to borrow...Ch. 14 - Modigliani and Miller (MM), on the one hand, and...Ch. 14 - Prob. 5Q Ch. 14 - One position expressed in the financial literature...Ch. 14 - Prob. 7Q Ch. 14 - What is the difference between a stock dividend...Ch. 14 - Most firms like to have their stock selling at a...Ch. 14 - Prob. 10Q

Solution Summary: The author explains whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.

Chapter 14 Solutions