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Mack Company, HappyDay’s branch, plans to invest $50,000 in land that will produce annual rent revenue equal to 15 percent of the investment, starting on January 1, Year 3. The revenue will be collected in cash at the end of each year, starting December 31, Year 3. Mack can obtain the cash necessary to purchase the land from two sources. Funds can be obtained by issuing $50,000 of 10 percent, five-year bonds at their face amount. Interest due on the bonds is payable on December 31 of each year with the first payment due on December 31, 2021. Alternatively, the $50,000 needed to invest in land can be obtained from equity financing. In this case, the stockholders (holders of the equity) will be paid a $5,000 annual cash dividend. Mack Company is in a 30 percent income tax bracket. Prepare an income statement and statement of cash flows for Mack Company for Year 3 under the two alternative financing proposals (debt financing and equity financing). Write a short memorandum explaining why…

For 2022, Jackie reported the following in relation to the primary income of the business operations: [Refer to the figure]. Jackie also provided the following information: Excess MCIT for 2021 was P20,000.  Net capital loss for 2021 was P20,000. Gross sales is net of the discounts given to senior citizens. Quarterly gross sales to them is P250,000. During the fourth quarter, there was a sale of a movable capital asset held for two years resulting to a gain of P100,000.  Assuming Jackie is a domestic corporation, what amount should be reflected on Schedule 2 Item 12 on the first quarterly return? A. 22,000 B. 23,000 C. 11,500 D. 11,000

The firm invests $1,000 today, and realizes after tax cashflows in the amounts of $110, $660, and $880 at the ends of years 1-3, respectively. WACC=10%.   Find NPV.

A firm, whose cost of capital is 8 percent, may acquire equipment for $146,825 and rent it to someone for a period of five years. Note: Although payment of rent is typically considered to be an annuity due, treat it as an ordinary annuity when completing this problem in a spreadsheet or when using present value factors. If the firm charges $38,730 annually to rent the equipment, what are the net present value and the internal rate of return on the investment? Use Appendix D to answer the questions. Use a minus sign to enter negative values, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number. NPV: $   IRR:  % Should the firm acquire the equipment? The firm  acquire the equipment as the net present value is  , and the internal rate of return  the firm's cost of capital. If the equipment has no estimated residual value, what must be the minimum annual rental charge for the firm to earn the required 8…

ABC Date Enterprise takes out a $40,000 loen to finance the purchase of new physical capital. It must repay the loan in full with interest in one year. The interest rate is 8 percent and the applicable corporate tax rate is 40 percent. What is the present value savings from the deductibility of the interest payment from ABC Date Enterprise's toxes? NOTE: Please round your numeric answer to the nearest dolliar. Do not enter the dollar sign or any commas.

A corporation has decided to use borrowed capital to finance a portion of an equipment purchase. The equipment will be partially financed by borrowing $40,000 on a 2-year contract at 7% interest compounded annually, with the loan to be repaid in two equal EOY installments. The average inflation rate during this period is expected to be 2%. Determine the loan payment amount.

An investor owns a property that produces an NOI of $110,000 and has an annual debt service of $70,000 and the forecast of cost recovery and interest deductions are $38,427 and $58,593 respectively. The investor’s marginal tax rate is 35 percent. The investor’s projected cash flow after taxes is: A. $30,000 B. $35,457 C. $43,256 D. $25,821

Capital Computer Corporation takes out a $10,000 loan to finance the purchase of new physical capital. It must repay the loan in full with interest in one year. The interest rate is 10 percent and the applicable corporate tax rate is 30 percent. What is the present value savings from the deductibility of the interest payment from Capital Computer Corporation’s taxes? Please round your answer to the nearest dollar.

The Great Company started the construction of a building on March 1, 2020 and finished it on June 30, 2021. You have the following information about the expenditures incurred on the construction in 2020:   March 1 $120,000 April 30 290,000 October 1 340,000 November 1 275,000   The Great company took out a one-year loan of $500,000 on April 1, 2020. The annual interest rate is 6%.   The company’s general borrowings are as follows:   Amount Annual interest rate 2-year Note payable, issued on March 1, 2019 $120,000 6% 1-year bank loan taken out on April 1, 2020 210,000 4% 2-year bank loan taken out on October 1, 2018 340,000 3%   Required- Assuming IFRS, determine the carrying value of the asset under-construction on December 31, 2020.

ABC Inc. asked your company for a 7-year loan of $50,000. The repayment of the loan will be as follows: ABC will pay $5,000 at the end of Year 1, $10,000 at the end of Year 2, and $15,000 at the end of Year 3, and fixed unspecified cash flow (assume X) at the end of each of the following years (Year 4 through Year 7). Assuming 8% as an appropriate rate of return on low risk but an illiquid 7-year loan. Find out the cash flow that this investment must provide at the end of each of the final 4 years (year 4 to year 7), that is, find out the X?

On January 1, 2018, Kline Inc. borrowed P9,000 from Harvard Co., and on January 1, 2020, it borrowed P12,000. On January 1, 2021, Kline Inc. paid a P7,000 half payment. The loan balance would be amortized over two payments, one on January 1, 2022 and the other on January 1, 2023, with the second payment being 50 percent bigger than the first. What is the amount of each payment if the interest rate is 10%?With a bit of explanation please.

ABC borrows $12,875 at a subsidized rate of 3.9% to invest in a project. The project lasts for 11 years and ABC repays the loan at the end of the project. If ABC's cost of debt is 6.8% and the tax rate is 39%, calculate the NPV of the this loan financing.

you invest $1,100,000 in equity into a property and the broker tells you that the property would produce a cash-in-cash return of 10%. it has a debt service of $85,000 annually. What is the net operating income?

For 2020, Electro Tech Inc. has reported earnings before interest and taxes (ebit) of $6.5 million; capital expenditures of $1.2 million; and depreciation of $0.7 million.  Net working capital for 2020 is $1.0 million and for 2019 is $0.7 million.  The tax rate for Electro Tech is 35%. Calculate Electro Tech’s free cash flow

The annual debt service on a property is $25,000 and the pre-tax cash flow is $50,000. If the mortgage capitalization rate is 8.5% and the overall rate is 10%, what is the indicated value of the property?

A business wants to borrow $300,000 from a bank for a future investment. The bank offers a 5 year loan, compounded quarterly, at 5% interest on the debt.  During the period of the bank loan, the company establishes a sinking fund to help discharge the bank loan, at 4%, compounded quarterly, using the future lump sum debt as the lump sum payment in the sinking fund. FIND: the quarterly deposits that the company must deposit into the sinking fund to pay off its bank debt in one lump sum.

You recently purchased an office building for $1,950,000 using the following loan terms: 70% LTV, 20-year amortization, 6.25% interest and monthly compounding. Assuming a net operating income of $150,000 in Year 1 and income taxes equal to $11,000, what is the expected ATCF from Operations in Year 1?

Sanders Co. is planning to finance an expansion of its operations by borrowing $52,100. City Bank has agreed to loan Sanders the funds. Sanders has two repayment options: (1) to issue a note with the principal due in 10 years and with interest payable annually or (2) to issue a note to repay  $5,210 of the principal each year along with the annual interest based on the unpaid principal balance. Assume the interest rate is 8.5 percent for each option.   What amount of interest will Sanders pay in year 1 under option 1 and under option 2?   What amount of interest will Sanders pay in year 2 under option 1 and under option 2?

The Odessa Supply Company is considering obtaining a loan from a sales finance company secured by inventories under a field warehousing arrangement. Odessa would be permitted to borrow up to $350,000 under such an arrangement at an annual interest rate of 10 percent. The additional cost of maintaining a field warehouse is $17,000 per year. Assume that there are 365 days per year. Determine the annual financing cost of a loan under this arrangement if Odessa borrows the following amounts: $350,000. Round your answer to two decimal places.   % $320,000. Round your answer to two decimal places.   %

BRCC is evaluating an option for funding its working capital during the next year. The company plans to issue 180-day commercial paper which has an annual interest rate of 8.8% and requires BRCC to pay a transaction fee equal to 0.25%. If BRCC actually needs $225,000 to finance working capital during the next year, how much must BRCC borrow so that it has $225,000 avaliable to pay bills?

You have been appointed as a financial consultant by the directors of Cochin Holdings. They require you to calculate the cost of capital of the company. The following information is available on the financing of the company: ·         R10 000 000, financial lease due in 5 years and the current yield-to-maturity is 10%. Prepare a loan amortization scheduleq

Killion Company needs to purchase new equipment, but does not have enough cash to purchase it outright. Therefore, on 1/1/21, Killion finances the purchase of the equipment by borrowing $29,000 on a 4-year, 5% installment loan. The loan specifies that Killion needs to make 4 payments of $8,178 once a year for the next four years. Each installment payment goes towards both accrued interest and the principal on the loan. Each installment payment is made on December 31. repare the journal entries for Killion to record the note's issuance and the first installment payment. (Round your intermediate alculations and final answers to the nearest dollar amount.) View transaction list Journal entry worksheet of 33 ― Next >

A man has two investments, one paying 3% annual interest and the other 4%. The total annual income from the investments is $17,000. If the interest rates were interchanged, the total annual income would be $18,000. Determine the following: The amount of each investment. Explain the concepts/principles that were considered and the factors that affected the condition of item (a)