fm3 17 - MVA 06 = $850,000 $663,768 = $186,232 i Assume...

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Mini Case: 3 - 17 h. What happened to Computron's market value added (MVA)? Answer: MVA = market value of the firm - book value of the firm. Market value = (# shares of stock)(price per share) + value of debt . Book value = total common equity + value of debt. If the market value of debt is close to the book value of debt, then MVA is market value of equity minus book value of equity. Assume market value of debt equals book value of debt. Market value of equity 2007 = (100,000)($6.00) = $600,000. Book value of equity 2007 = $557,632. MVA 07 = $600,000 - $557,632 = $42,368.
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Unformatted text preview: MVA 06 = $850,000 - $663,768 = $186,232. i. Assume that a corporation has $100,000 of taxable income from operations plus $5,000 of interest income and $10,000 of dividend income. What is the company’s tax liability? Answer: Calculation of the company’s tax liability: Taxable operating income $100,000 Taxable interest income 5,000 Taxable dividend income (0.3 × $10,000) 3,000 Total taxable income $108,000 Tax = $22,250 + ($108,000 - $100,000)0.39 = $25,370. taxable dividend income = dividends - exclusion = $10,000 - 0.7($10,000) = $3,000 ....
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