The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 8 percent to helpfinance a new playground facility in Los Angeles. Thisyear the cost of debt is 25 percent higher; that is, firmsthat paid 10 percent for debt last year will be paying12.50 percent this year.a. If the Goodsmith Charitable Foundation borrowedmoney this year, what would the aftertax cost of debtbe, based on their cost last year and the 25 percentincrease? (Do not round intermediate calculations.Input your answer as a percent rounded to 2 decimalplaces.)Aftertax cost of debt%b. If the receipts of the foundation were found to betaxable by the IRS (at a rate of 30 percent because ofinvolvement in political activities), what would theaftertax cost of debt be? (Do not round intermediatecalculations. Input your answer as a percent roundedto 2 decimal places.)Aftertax cost of debt%

Cost of Debt: It is the cost of raising capital from debt instruments to the issuer. For debt…

Answered: a. If the Goodsmith Charitable…

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter13: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 41P

See similar textbooks

Similar questions

Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed 2.5 million on January 1 specifically for the project by issuing a 10%, 5-vear, 2.5 million note, which is payable on December 31 of Year 3. Dexter also had a 12%, 5-year, 3 million note payable and a 10%, 10-year, 1.8 million note payable outstanding all year. Calculate the weighted average interest rate on the non-construction-specific debt for Year 1. RE10-9 Refer to RE10-8. In Year 1, Dexter incurred costs as follows: Calculate Dexters weighted average accumulated expenditures.
The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 10 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 30 percent higher; that is, firms that paid 12 percent for debt last year will be paying 15.60 percent this year. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on their cost last year and the 30 percent increase? (Do not round intermediate calculations. Input the answer as a percent rounded to 2 decimal places.) If the receipts of the foundation were found to be taxable by the IRS (at a rate of 35 percent because of involvement in political activities), what would the aftertax cost of debt be? (Do not round intermediate calculations. Input the answer as a percent rounded to 2 decimal places.)
The government has imposed a fine on JJ’s Place. The fine calls for annual payments of $60,000, $70,000, $75,000, and $50,000, respectively, over the next four years. The first payment is due one year from today. The government plans to invest the funds until the final payment is collected and then donate the entire amount, including the investment earnings, to help the local community shelter. The government will earn 5.5 percent on the funds held. How much will the community shelter receive four years from today?
A student has borrowed $27,500 in Perkins loans (available to students with exceptional need). The rate on the loan is 5% and the government has paid the interest while the student has been in school. To simplify the calculations assume annual tuition and loan payments. What are the differences in the payment amount and the total paid if the student pays the loan back in 5 years and in 20 years? Is the availability of the student loan interest likely to reduce the after-tax cost of the loan?
Perkin Corporation has determined that it qualifies for a tax credit in the amount of $120,000. For the current year, it has tax liability before credits of $75,000. It expects at least that amount of tax liability next year. Required: If the excess credit is not refundable but may be carried forward, calculate the value of the credit. Assume Perkins uses a 4 percent discount rate to calculate present value. If the excess credit is refundable, what is the value of the credit?
The government has imposed a fine on JJ’s Place. The fine calls for annual payments of $60,000 one year from now, $70,000 two years from now, $75,000 three years from now, and $50,000 four years from now. The government plans to invest the funds until the final payment is collected and then donate the entire amount, including the investment earnings, to help the local community shelter. The government will earn 7.5 percent on the funds held. How much will the community shelter receive four years from today? Group of answer choices $328,572 $236,875 $277,491 $286,057 $281,748
The city of Glendale borrows $48 million by issuing municipal bonds to help build the Arizona Cardinals football stadium. It plans to set up a sinking fund that will repay the loan at the end of 10 years. Assume a 4 percent interest rate per year. What should the city place into the fund at the end of each year to have $48 million in the account to pay back their bondholders?
A corporation creates a sinking fund in order to have $440,000 to replace some machinery in 8 years. How much should be placed in this account at the end of each week if the annual interest rate is 3.8% compounded weekly? (Round your answers to the nearest cent.) $ How much interest would they earn over the life of the account? $ Determine the value of the fund after 2, 4, and 6 years. 2 years$4 years$6 years$ How much interest was earned during the second week of the 4th year?
A corporation creates a sinking fund in order to have $950,000 to replace some machinery in 11 years. How much should be placed in this account at the end of each week if the annual interest rate is 3% compounded weekly? (Round your answers to the nearest cent.)$ How much interest would they earn over the life of the account?$ Determine the value of the fund after 2, 4, and 6 years. 2 years $ 4 years $ 6 years $ How much interest was earned during the fourth week of the 6th year?
Northeastern costs approximately $50,000 per year for a four-year program, whether completed in four years or five. Assume that a student’s parents realized 15 years ago that college was going to cost $50,000 per year for four years, and wondered how much they would have to save each year to have the money to pay for the student’s education. The assumption is that payments are made into the college fund each year (as an ordinary annuity), and payments are withdrawn from the fund at the end of the relevant years.The key information for this scenario is as follows: The number of years of contributions is 18. Assume for simplicity that the college payments will be made at the end of years 15, 16, 17, and 18, that is just after each deposit in those years. The interest rate is 10 percent. College costs are $50,000 per year, and are assumed to be the same for each of the four years. Using the key information for the scenario above, how much would the parents have to save each year for…
Specialty Corp is a cash basis calendar-year taxpayer. The corporation has a 25 percent marginal tax bracket this year. It will receive an additional $5,000 this year if it bills its customers at the beginning of December. But if it bills its customers at the end of December, it will not receive the $5,000 until January of next year. If Specialty Corp’s marginal tax rate next year is estimated to be 15 percent, when would the company most likely bill its customers? Specialty Corp. would bill its customers at the beginning of December. Specialty Corp would bill its customers in the middle of December Specialty Corp would bill its customers at the end of December. It will not matter when the company bills its customers for tax purposes
A corporation creates a sinking fund in order to have $640,000 to replace some machinery in 10 years. How much should be placed in this account at the end of each quarter if the annual interest rate is 5.3% compounded quarterly? (Round your answers to the nearest cent.)$ How much interest would they earn over the life of the account?$ Determine the value of the fund after 2, 4, and 6 years. 2 years $ 4 years $ 6 years $ How much interest was earned during the second quarter of the 5th year?

SEE MORE QUESTIONS

Recommended textbooks for you

SWFT Corp Partner Estates Trusts

Accounting

ISBN:

9780357161548

Author:

Raabe

Publisher:

Cengage

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

SWFT Corp Partner Estates Trusts

Accounting

ISBN:

9780357161548

Author:

Raabe

Publisher:

Cengage

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

SEE MORE TEXTBOOKS