FIN-504.week1.problemset1.xlsx - Monsanto Corporation...

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Monsanto Corporation Purchase of New Equipment Cost-Benefit Analysis Benefits with the new equipmen ### Less: Benefits with the old equ ### Marginal (added) benefits of th ### Cost of new equipment ### Less: Proceeds from the sale o ### Marginal (added) costs of the N ### Net benefit of the proposed purchas ###
Current Income With No Expansion Before tax income $200,000 Corporate Tax Rate Schedule Interest expense $0 Taxable income $200,000 Range of taxable income Marginal tax rate x Amount over base bracket $0 to $50,000 15% x $7,500 $50,000 to $75,000 25% x $6,250 $75,000 to $100,000 34% x $8,500 $100,000 to $335,000 39% x $39,000 $335,000 to $10,000,000 34% x $10,000,000 to $15,000,000 35% x $15,000,000 to $18,333,333 38% x $18,333,333 over 35% x Total corproate tax libility $61,250 Average corporate tax rate 30.63%
Expansion Income Expansion Income Using Cash Reserves Using Debt Financing $350,000 $350,000 $0 $70,000 $350,000 $280,000 Amount over base bracket Amount over base bracket $7,500 $7,500 $6,250 $6,250 $8,500 $8,500 $91,650 $70,200 $5,100 $119,000 $92,450 34.00% 33.02%
a) Merideth Harper has an investment of $25,000 in Southwest Development company, but the debt is In a sole proprietorship, the owner is liable for any debt incurred. This means that Merideth Harper owes an extra $35,000 and has to cover the whole debt. b) If the company were a limited liability partnership, both partners would not owe an equal amount o If the partnership were unlimited, Meredith Harper and Christopher Black will have to cover the deb c)

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