BUS 401.Finance – DQ’s

BUS 401.Finance – DQ’s -...

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Unformatted text preview: BUS 401.Finance DQs Week 1 1. Corporate Income Tax and Real Interest Rates From Chapters 1 and 2, complete Study Problems 1-2 (page 26) and 2-2 (page 58) and post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates' postings. Discussion 1: 1-2 Sales 5,000,000 Cost of Goods Sold (2,000,000) Gross Profit 3,000,000 Tax-deductible Expenses: Operating Expenses 1,000,000 Interest Expense 100,000 (1,100,000) 1,900,000 Other Income: Interest Income 20,000 Dividend Income 25,000 70% exclusion (17,500) 7500*34% 2,550 Taxable Ordinary Income 1,922,550 Loss on Sale: 4 year securities 40,000 3 month securities 50,000 (10,000) Taxable Income 1,912,550 Tax Liability: .15 * 50,000 = 7500 .25 * 25,000 = 6250 .34 * 1,837,550 = 624,767 5% surtax = 11,250 650,267 2-2 3 mo 30 yr inflation 1991 5.42 8.14 3.1 1992 3.45 7.67 2.9 1993 3.02 6.59 2.7 1994 4.29 7.37 2.7 1995 5.51 6.88 2.5 21.69/5 36.65/5 13.9/5 = 4.34 =7.33 =2.78 Real Rate of Return (nominal interest rate inflation rate) 3 mo 30 yr 1991 5.42 - 3.1 = 2.32 8.14 - 3.1 = 5.04 1992 3.45 - 2.9 = .55 7.67 2.9 = 4.77 1993 3.02 2.7 = .32 6.59 2.7 = 3.89 1994 4.29 2.7 = 1.59 7.37 2.7 = 4.67 1995 5.51 2.5 = 3.01 6.88 2.5 = 4.38 Mean = 7.79/5 = 22.75/5 = 1.558 or 1.56 = 4.55 2. Cash Flow and Ratio Analysis From Chapters 3 and 4 complete Study Problems 3-2 (page 85) and 4-2 (page 122) and post the answers to the discussion board. Remember to complete all parts of the problems and report the answers to the discussion board....
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BUS 401.Finance – DQ’s -...

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