Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 15, Problem 9P
To determine
Calculate the cost of capital.
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At the end of 2011 Home Depot's total capitalization amounted to $29,031 million. In 2012 debt investors received interest income of $648 million. Net income to shareholders was $4,487 million. (Assume a tax rate of 35%.) Calculate the economic value added assuming its cost of capital is 10%. (Do not round intermediate calculations. Give your answer in millions rounded to 2 decimal places.)
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Perfection Corp earned $250 million before tax in 2022. Its combined Federal and State tax rate was 26%, and the company paid $60 million in dividends. Given a dividend tax rate of 20%, what were total taxes paid from Perfection’s earnings?
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Contemporary Engineering Economics (6th Edition)
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- A company's second year operations can be summarized as follows: Revenues: $110 000 Expenses (except CCA): $65 000 Its capital asset purchases in the first year totalled $100 000, with none in the second year. With a CCA rate of 20 percent and a tax rate of 55 percent, how much income tax did it pay?arrow_forwardBob is a 25% partner is ABC partnership. ABC earned $500,000 in income for the past year. What amount of income is taxable to Bob?arrow_forwardA project currently generates sales of $10 million, variable costs equal to 40% of sales, and fixed costs of $2.3 million. The firm's tax rate is 20%. The project will last for 10 years. The discount rate is 13%. How much can fixed costs increase before accounting profits turn negative? Express your answer in millions rounded to 2 decimal placesarrow_forward
- For the most recent year, LMN, Inc., had sales of $467396, cost of goods sold of $234116, depreciation expense of $51178, and additions to retained earnings of $69054. The firm currently has 18455 shares of common stock outstanding, and the previous year's dividends per share were $1.31. Assuming a 27 percent income tax rate, what was the times interest earned ratio? Answer to two decimal places.arrow_forwardBrewster Company manufactures elderberry wine. Last year, Brewster earned operating income of $187,000 after income taxes. Capital employed equaled $2.6 million. Brewster is 40 percent equity and 60 percent 10-year bonds paying 6 percent interest. Brewster's marginal tax rate is 40 percent. The company is considered a fairly risky investment and probably commands a 12-point premium above the 4 percent rate on long-term Treasury bonds. Jonathan Brewster's aunts, Abby and Martha, have just retired, and Brewster is the new CEO of Brewster Company. He would like to improve EVA for the company. Compute EVA under each of the following independent scenarios that Brewster is considering. Required: spreadsheet to perform your calculations and round all interim and percentage figures to four decimal places. If the EVA is negative, enter your answer as a negative amount. 1. No changes are made; calculate EVA using the original data. -35,560 ✔ 2. Sugar will be used to replace another natural…arrow_forwardPlease help to solve thisarrow_forward
- 17.7 Rotana Construction, Inc., has operated for the last 21 years in a northern U.S. state where the state income tax on corporate revenue is 6% per year. Rotana pays an average federal tax of 23% and reports taxable income of $7 million. Because of pressing labor cost increases, liability insurance premium increases, and other cost increases, the president wants to move to another state to reduce the total tax burden. The new state may have to be willing to offer tax allowances or an interest-free grant for the first couple of years in order to attract the company. You are an engineer with the company and are asked to do the following. (a) Determine the effective tax rate for Rotana. (b) Estimate the state tax rate that would be necessary to reduce the overall effective tax rate by 10% per year. (c) Determine what the new state would have to do financially for Rotana to move there and to reduce its effective tax rate to 22% per year.arrow_forwardThe capital budget of Creative Ventures Inc. is $1,000,000. The company wants to maintain a target capital structure that is 30% debt and 70% equity. The company forecasts that its net income this year will be $800,000. If the company follows a residual dividend policy, what will be its total dividend payment?arrow_forwardPlease answerarrow_forward
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