2010 Tax Bill Example

2010 Tax Bill Example - 2010TaxBillExample:

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2010 Tax Bill Example : Annabelle is in the 35% tax bracket. After  calculating taxes owed, her accountant  gave Annabelle two options: Option 1:  Pay an additional  $9,800  in  taxes Option 2:  Pay  $6,000  in taxes and  invest  $11,000  in a SEP- IRA Of the $11,000 saved in a SEP-IRA, the  client only “contributed” $7,200 (the  other $3,800 was money that she  didn’t pay in taxes). Point: Tax Savings is Real!    Prescott Corporation issues a  $1,000 par 20 year  bond paying  the market rate of  10% .  Coupons  are  annual .  The bond will sell for   par since it pays the market rate
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but flotation costs amount to  $50  per bond.  Prescott’s marginal tax  rate is  34% . What is the pre-tax and after-tax  cost of debt for Prescott 
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This note was uploaded on 11/23/2011 for the course BUS M 301 taught by Professor Jimbrau during the Summer '11 term at BYU.

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2010 Tax Bill Example - 2010TaxBillExample:

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