FINAL ANSWER KEY

FINAL ANSWER KEY - MULTIPLE CHOICE Ques 1 2 3 4 5 6 7 8 9...

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MULTIPLE CHOICE Ques 1 c 2 c 3 a 4 d 5 d 6 a 7 b 8 c 9 c 10 d 11 a 12 a 13 a 14 a 15 a 16 d 17 d 18 d 19 d 20 a 21 a 22 b 23 a 24 a 25 c 26 d 27 a 28 d 29 a 30 d 31 b 32 a 33 d 34 b 35 c 36 c
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PROBLEM I - Taxes An investor is considering two investment options: (1) a municipal bond paying $8,500 of interest per year, or (2) a “growth” stock which is expected to provide a $9,500 gain when sold 13 months from the date of purchase; it is not expected to pay dividends. PART A: Determine the after-tax cash flow for each investment for an individual taxpayer with a marginal tax rate of 35%. MUNICIPAL BOND STOCK INVESTMENT EFFECT ON TAXABLE INCOME: Income Received 0 $9,500 x Tax Rate .00 or .35 . 15 = Taxes on Investment Income 0 $1,425 AFTER-TAX CALCULATION: Income Received Less: Taxes AFTER-TAX CASH FLOW $8,500 0 $8,500 $9,500 1,425 $8,075 PART B: Which investment would you recommend for the individual taxpayer? Bond __
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This note was uploaded on 04/18/2009 for the course MGA 201 taught by Professor Anderson during the Fall '08 term at SUNY Buffalo.

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FINAL ANSWER KEY - MULTIPLE CHOICE Ques 1 2 3 4 5 6 7 8 9...

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