Determine the amount by which the land increase in value to yield a greater after-tax return than either of bonds.

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Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 24% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are: A taxable corporate bond yielding 5.333% before tax and the interest can be reinvested at 5.333% before tax. A Series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return). Land that will increase in value. The gain on the land is classified and taxed as a long-term capital gain. The income from the bonds is taxed as ordinary income. How much must the land increase in value to yield a greater after-tax return than either of the bonds? Below are the factors for the compound amount of $1 and compound value of annuity payments at the end of five years: Interest Rate $1 Compoundedfor Five Years $1 Annuity Compoundedfor Five Years 4% 1.2167 5.4163 5%…

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Chapter 4, Problem 29P

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Determine the amount by which the land increase in value to yield a greater after-tax return than either of bonds.

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Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 24% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are: A taxable corporate bond yielding 5.333% before tax and the interest can be reinvested at 5.333% before tax. A Series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return). Land that will increase in value. The gain on the land is classified and taxed as a long-term capital gain. The income from the bonds is taxed as ordinary income. How much must the land increase in value to yield a greater after-tax return than either of the bonds? Below are the factors for the compound amount of $1 and compound value of annuity payments at the end of five years: Interest Rate $1 Compoundedfor Five Years $1 Annuity Compoundedfor Five Years 4% 1.2167 5.4163 5%…

A taxpayer can invest $10,000 in a taxable 10-year bond that yields an annual pretax return of 6 percent or buy land (a capital asset) for $10,000 that is expected to increase at an annual pre-tax rate of 4 percent. The taxpayer expects to hold the bond and the land for 10 years and expects to pay capital gains taxes of 20 percent when the land is sold. The taxpayer’s marginal tax rate on ordinary income is expected to be 25 percent throughout the 10-year period. Can you please show in Excel? I like to use formulas when possible. Thank you!