Ellie wants to report the before-tax IRR on a potential project to the upper management at her company. She calculated a 7.9% after tax IRR which compared in favour of the project to the after-tax MARR of 5.8%. If Ellie's company pays 51% corporate taxes, what numbers will she give upper management?
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- The manager of Pharoah is given a bonus based on net income before taxes. The net income after taxes is $75980 for FIFO and $64500 for LIFO. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of LIFO?A company wants to set up a new office in a country where the corporate tax rate is: 15% of first $50,000 profits, 25% of next $25,000, 34% of next $25,000, and 39% of everything over $100,000. Executives estimate that they will have gross revenues of $500,000, total costs of $300,000, $30,000 in allowable tax deductions, and a one-time business start-up credit of $8000. What is taxable income for the first year, and how much should the company expect to pay in taxes?New Business is just being formed by 10 investors, each of whom will own 10% of the business. The firm is expected to earn $2,000,000 before taxes each year. The corporate tax rate is 34% and the personal tax rate for the firm's investors is 32%. The firm does not need to retain any earnings, so all of its after-tax income will be paid out as dividends to its investors. The investors will have to pay personal taxes on whatever they receive. How much additional spendable income will each investor have if the business is organized as a partnership rather than as a corporation? a. $46,240 b. $39,520 c. $4,000 d. $48,880 e. $43,520
- Sherry just received a big promotion at the corporation. Last year her salary was $100,000, but due to her promotion, she expects to earn $180,000 this year. She expects that she will be able to save about $60,000 of her pay raise and is interested in exploring ways to minimize her federal tax liability. List some of the tax-planning opportunities with respect to her salary.John is considering making a $7,000 investment in a venture that its promoter promises will generate immediate tax benefits for him. John, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket. If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will John's tax liability decline because of the investment? a.) $2,400 b.) $0 c.) $2,100 d.) $2,800According to a professional analysis of one proposed federal tax cut (by the accounting firm Deloitte and Touche), the cut would have resulted in the following income tax savings: a single person with a household income of $41,000 would save $211 in taxes; a single person with a household income of $530,000 would save $12,838 in taxes; a married couple with two children and a household income of $41,000 would save $1208 in taxes; and a married couple with two children and a household income of $530,000 would save $13,442 in taxes. Find the absolute difference in savings between a single person earning $41,000 and a single person earning $530,000. Then express the savings as a percentage of earnings for each person. Find the absolute difference in savings between a married couple with two children earning $41,000 and a married couple with two children earning $530,000. Then express the savings as a percentage of earnings for each couple. Write a paragraph either defending or…
- Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $30,000 for the current year. Because of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation. Question Content Area a. How much better off would Kristen be if she were paid a dividend rather than salary? If Kristen were paid a bonus, she would receive $fill in the blank bcbd0cf5affa04c_1 22,800 after taxes. If Kristen receives a dividend rather than salary, she would receive $fill in the blank bcbd0cf5affa04c_2 25,500 after taxes. Thus, she would be better off by receiving the dividend . Feedback Area Feedback Closely held corporations have considerable discretion regarding their dividend policies. In the past, the double tax result provided strong motivation to avoid the payment of dividends. Instead, the incentive was to bail out corporate profits in a…Assume that Provident Health System, a for-profit hospital, has $1 million in tax-able income for 2020, and its tax rate is 30 percent (combined federal and state tax rates). Given this information, what is the firm’s net income? Suppose the hospital pays out $300,000 in dividends. A shareholder, Carl Wu, receives $10,000. If Carl’s initially paid $100,000 for his shares and faces a tax rate on dividends of 15 percent, what is his after-tax dividend and after-tax rate of return on his investment. Suppose that Aditi Patel currently holds tax-exempt bonds of Good Samaritan Healthcare that pay 7 percent interest. She is in the 40 percent tax bracket. Her broker wants her to buy some Beverly Enterprises taxable bonds that will be issued next week. With all else the same, what rate must be set on the Beverly bonds to make Aditi interested in making a switch? Due date is midnight of day 7. Your submission can be made in WORD or EXCEL. Clearly show your work and provide a concise…An investor is considering investing in one of two firms (C and D). The WACC is 12% and the corporate income‐tax rate is 25% for both firms. Firm C’s equity totals $100 million and its net annual operating profit before taxes is $24 million. Firm D’s equity totals $200 million and its net annual operating profit before taxes is $36 million. Based on an EVA analysis, which firm is stronger economically?
- In 2007, two domestic corporations operating in the same industry report the following effective tax rates: Rally and More, Inc., 35%, and Dontall and Less, Inc., 20%. You believe Dontall is doing a better job with their tax planning due to the lower effective tax rates and, therefore, decide to invest $100,000 in Dontall. After a couple of years, you find out from a public announcement that Dontall has been under investigation by the IRS for using some aggressive tax planning strategies. You contact the CEO of Dontall who tells you it is nothing to worry about and that the CPAs (Anderson and Company CPAs) have this all under control. One year later, the stock takes a nosedive on a Wednesday morning after the press prints an article stating that the IRS has adjusted the taxable income of Dontall upward after an auditor found that some of the reported tax benefits and expenses were falsely reported. Even before the penalties, the newly assessed tax rate of Dontall is now greater than…In connection with the previous problem, suppose a certain governmentemployee earns a performance benefit = ₱2,340/month, 13 th Month Pay =₱15,780.43, and he has other benefits amounting to ₱6,000. How much of theadditional earnings will be taxed?A company, based in the Midwest, requires an 8.000% after tax rate of return. The state tax rate is 5% and the company is in the 21% federal tax bracket.Using the combined incremental tax rate equation on p. 433 of the textbook and the after-tax rate of return equation on p. 439, what is the estimate of the before-tax rate ofreturn required.Give rate of return in percent to 3 decimal places like 10.134% or 9.765%
