Curtis invests $200,000 in a city of Athens bond that pays 4.00 percent interest. Alternatively, Curtis could have invested the $200,000 in bond recently issued by Initech, Inc. that pays 5.00 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much after-tax earnings would Curtis have on the interest earned on the City of Athens bond? (Do not use $or commas)
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- Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond?Melinda invests $220,000 in a City of Heflin bond that pays 6.8 percent interest. Alternatively, Melinda could have invested the $220,000 in a bond recently issued by Surething Incorporated that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda's marginal tax rate is 15 percent. Note: Leave no cells blank - be sure to enter "0" wherever required. Round your after-tax rate of return to one decimal place. Required:1.What is her after-tax rate of return for the City of Heflin bond?2.How much explicit tax does Melinda pay on the City of Heflin bond?3.How much implicit tax does she pay on the City of Heflin bond?4.How much explicit tax would she have paid on the Surething Incorporated bond?5.What is her after-tax rate of return on the Surething Incorporated bond?a. After-tax rate of return ___% ? b. Explicit tax ___ ? c. Implicit tax __? d. Explicit tax __? e. After-tax rate of return ___% ?An 8.4 percent coupon bond issued by the state of Indiana sells for $1,000. What coupon rate on a corporate bond selling at its $1,000 par value would produce the same after-tax return to the investor as the municipal bond if the investor is in: a. the 15 percent marginal tax bracket? b. the 25 percent marginal tax bracket? c. the 35 percent marginal tax bracket?
- 5) An investor purchases one municipal and one corporate bond that pay rates of return of 8% and 10%, respectively. If the investor is in the 22% marginal tax bracket, what will be his or her after-tax rates of return on the municipal and corporate bonds?Curtis invests $800,000 in a city of Athens bond that pays 5 percent interest. Alternatively, Curtis could have invested the $800,000 in a bond recently issued by Initech, Incorporated that pays 7 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much implicit tax would Curtis pay on the city of Athens bond?Question 7 Gioanni Inc., has GH¢1 million in earnings before interest and taxes. Currently it is all-equity-financed. It may issue GH¢3 million in perpetual debt at 15 percent interest in order to repurchase stock, thereby recapitalizing the corporation. There are no personal taxes. If the corporate tax rate is 40 percent, what is the income available to all security holders if the company remains all-equity-financed? If it is recapitalized? What is the present value of the debt tax-shield benefits? The equity capitalization rate for the company’s common stock is 20 percent while it remains all-equity-financed. What is the value of the firm if it remains all-equity financed? What is the firm’s value if it is recapitalized?
- Problem 1-45 (LO 1-3, LO 1-4) (Algo) Fergie has the choice between investing in a State of New York bond at 10.0 percent and a Surething Incorporated bond at 13.0 percent. Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?Amar Corporation pays 11.6% interest on its outstanding bonds. If its tax rate is 40%, what is its after-tax cost of debt?D4) Finance The Grant Corporation is considering permanently adding $500 million of debt to its capital structure. Grant's corporate tax rate is 35% and investors pay a tax rate of 40% on their interest income and 20% on their income from capital gains and dividends. Using Miller’s (1977) model calculate the present value of the interest tax shield provided by this new debt. Please round your answer to the nearest 0.01. 33.33 million 50.00 million 66.67 million 80 million None of the above
- chapter 10 question 1 Assume an investor can earn 0.15 before tax and 0.12 after tax. A corporation can earn 0.14 after corporate tax. It has $100 available for investment. The tax rate on dividends and capital gains is 0.15. If the corporation retains for 15 years and then pays a dividend the investor nets $__________. If the corporation pays an immediate dividend, the investor will have (after 15 years) $_________Calculate the after-tax return of a(n) 5.625.62 percent, 20-year, A-rated corporate bond for an investor in the 1515 percent marginal tax bracket. Compare this yield to a(n) 3.683.68 percent, 20-year, A-rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 3535 percent marginal tax bracket. Question content area bottom Part 1 The after-tax return of the 5.625.62%, 20-year, A-rated corporate bond for an investor in the 1515% marginal tax bracket is enter your response here%. (Round to two decimal places.) Part 2 Compare this yield to the 3.683.68%, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. (Select the best answer below.) A. The after dash tax yield of 4.78 % for the corporate bond is a better alternative than the 3.68 % tax dash free municipal bondThe after-tax yield of 4.78% for the corporate bond is a better…Question content area top Part 1 Calculate the after-tax return of a(n) 8.858.85 percent, 20-year, A-rated corporate bond for an investor in the 1010 percent marginal tax bracket. Compare this yield to a(n) 5.955.95 percent, 20-year, A-rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 3333 percent marginal tax bracket.