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pof1 - 4 a Cash inflows $4,950 cash outflows $4,357 b net...

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Chris Bergman Principles of Finance SECTION 25049 OPC 004 September 29, 2008 [email protected] 210-259-3921 Chapter 1 Assignment 1) a. Since Mrs. Harper is the sole proprietor of Southwest Development Company, she has unlimited liability. This means that she could lose her total wealth to be taken in order to payoff the company’s $60,000 debt, and satisfy creditors. b. Mrs. Harper would still have unlimited liability, and would be responsible for Mr. Blacks portion of the debt if he could not pay for it. c. She will only lose her $25,000 share in the company. 3) a. Thomas Book Sales Inc. income statement for the year ended 12/31 Sales Revenue $760,000 Less: Cost $300,000 Net Profit $20,000 ======= b. Thomas Book Sales Inc. Cash flow statement For the year ended 12/31 Cash inflow $690,000 Less: Cash outflow 300,000 Net cash flow ($390,000) ======== c. Cash flow statements are more useful for financial managers.
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Unformatted text preview: 4) a. Cash inflows: $4,950 cash outflows: $4,357 b. net cash flow: $593 c. There is not a shortage d. She could use the surplus for short-term investments. 9) a. $196,000 b. Tax on interest income $8,000 After tax on interest income $ 12,000 c. Tax on dividend $ 2,400 After tax dividend income $17,600 d. The tax on interest is calculated by multiplying income from interest by the tax bracket. Then you subtract the tax from the income to get the after tax income from interest. The tax on dividend is found by multiplying the income from dividends by (1-(% of dividend exclusion rate). Then you subtract this number from the income from dividends to get the after tax dividend income. e. Total tax liability is $206,400 11) a. Capital gain on asset X= $250 Capital gain on asset Y= $5,000 b. Tax on sale of asset X= $100 Tax on sale of asset Y= $2,000...
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