Anastasia wants to invest $1.5M. Based on her income she is currently in the 33% tax bracket for ordinary income and in the 15% bracket for long-term capital gains. Her tax brackets for state income tax purposes are 7% and 0 % on long-term capital gains. Consider the following situations: Type Time horizon Income Discount rate Repayment/Sale Comments Situation 2 (2) Situation 2: Corporate Bonds 5 years 11% interest annually 5.5% Situation 2 Taxable at ordinary income tax rates; no state income tax Municipal Bonds 7 years 6.5% interest annually 5% Repaid after 5 Repaid after years 7 years Not taxable for federal income tax but state income tax of 7% applies Requirements: Determine the net present value of the after-tax cash flow for: (1) Situation 1:
Anastasia wants to invest $1.5M. Based on her income she is currently in the 33% tax bracket for ordinary income and in the 15% bracket for long-term capital gains. Her tax brackets for state income tax purposes are 7% and 0 % on long-term capital gains. Consider the following situations: Type Time horizon Income Discount rate Repayment/Sale Comments Situation 2 (2) Situation 2: Corporate Bonds 5 years 11% interest annually 5.5% Situation 2 Taxable at ordinary income tax rates; no state income tax Municipal Bonds 7 years 6.5% interest annually 5% Repaid after 5 Repaid after years 7 years Not taxable for federal income tax but state income tax of 7% applies Requirements: Determine the net present value of the after-tax cash flow for: (1) Situation 1:
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN:9781337117005
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter3: Preparing Your Taxes
Section: Chapter Questions
Problem 3FPE
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