Answered: How much debt is outstanding if the…

How much debt is outstanding if the present value of a perpetual tax shield is $350,000, the tax rate is 21% and the interest rate on the debt is 10%? O$300,000 O $1,428,571 O$3.000,000 $1,666,667

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter13: Tax Credits And Payment Procedures

Section: Chapter Questions

Problem 25P: LO.2 Oak Corporation has the following general business credit carryovers. If the general business...

See similar textbooks

Related questions

Q: c. Suppose the government imposes a 25 percent tax on accounting profits. This tax is levied only if…

A: The question is based on the concept of Business Accounting.

Q: Taxpayer Y, who has a 30 percent marginal tax rate, invested $65,000 in a bond that pays 8 percent…

A: The annual cash flow from the investment shall be without deducting tax if the interest is…

Q: Water and Power Company (WPC) can borrow funds at an interest rate of 12.50% for a period of eight…

A: After tax cost of debt = Interest rate x (1 - tax rate)

Q: Holly's Art Galleries recently reported $15.8 million of net income. Its EBIT was $25 million, and…

A: Here, Net Income is $15,800,000 EBIT is $25,000,000 Federal Tax Rate is 21%

Q: What is the company's federal income tax bill for the year? Enter your answer in dollars. For…

A: Federal Tax rate = 21% Taxable Income = $45 million Interest Income = $1 million

Q: Europa Inc lent its manager P1,000,000 at a lower rate of 3% interest per annum. What is the fringe…

A: Fringe Benefit Tax For calculating the fringe benefit taxes in Philippines first to calculate the…

Q: he Wendt Corporation reported $45 million of taxable income. Its federal tax rate was 21% (ignore…

A: The amount of income needed to determine the taxes owing by an individual or a business is referred…

Q: If a company's Income tax rate Is 30% and its annual depreclation deduction Is $80,000, then the…

A: Since depreciation deduction is debited to profit or loss account/income statement, we will save…

Q: How much tax is Bison Co.'s tax expense, if it has $365,000 in gross income realized, $10,000…

A: The company's aim will be to increase the profitability. The profitability of the company can be…

Q: 2. Bingbing Construction recently reported RM25.50 million of sales, RM10.60 million of operating…

A: Calculate the operating income or EBIT of the corporation by deducting the operating costs and…

Q: What is the amount of Taxes Owed for the period if the tax rate is 30%, if Earnings Before Taxes (…

A: Taxes are the amount due to the government on the income earned by an individual or a company. The…

Q: If a firm borrows $50 million for one year at an interest rate of 9 percent, what is the present…

A: In this question first we need to calculate the interest amount. Interest amount=$50 million*9%=$4.5…

Q: Tatum Co. has a 25 percent tax rate. Its total interest payment for the year just ended was $22.3…

Q: arrying amount of

A: The tax base is the total income of the individual that is subject to tax. It includes all the…

Q: How much is the tax base of the liability?

A: Given carrying amount=4000 Tax rate = 40%

Q: How much tax is Bison Co's tax expense, if it has $365,000 in gross income realized, $10,000…

A: Given, Gross Income = $365,000 Interest on Municipal bonds = $8,000 Tax credits = $164,000…

Q: 5. If the corporation pays corporate income tax at a rate of 30% and it wants to earn after tax…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: Total deductible income tax credit would be P80,000 P60,000 P20,000 P0 None of the above

A: NOTE : As per BARTLEBY guidelines, when multiple questions are given then first question is to be…

Q: If a company earns $48,000 income on a municipal bond and the tax rate is 20%, Income tax expense…

A: Taxes are the compulsory payment that should be made by the taxpayer.

Q: During 2020, Coronado Inc. had sales revenue $1368000, gross profit $730300, operating expenses…

A: answer with explanation areas follows:

Q: What is the value of before tax equity reversion if sales price is Tk. 8900000, selling expense is…

A: Sales price = Tk. 8900000 Selling expense = 20% of sales = 20% x Tk.…

Q: 1. How much is the tax due on a taxable income of P250,000? а. 0 b. 1,250 с. 50,000 d. 30,000

A: Taxable income states the base upon which the system of income tax imposes or put the tax on citizen…

Q: Bill would like advice on investing in a $70,000 2-year ‘snowball’ fixed deposit providing an…

Q: A company issues a P300,000, 10 percent, 20-year bond. The tax rate is 40 percent. What is the…

A: Semiannual interest payment = Face value of Bond x interest rate x no. of months/12 = P300,000 x 10%…

Q: Yana Corp. has a profit before tax of P90 million. If the company's times interest covered ratio is…

A: Interest coverage ratio = Profit before Tax and Interest / Interest expense Interest coverage ratio…

Q: The cash flow plan associated with a debt financing transaction allowed a company to receive…

Q: One branch of Galssy Company earned an income of P560,000 before bonus and taxes for 2020. The…

Q: 11. In 2019, LSP company reported a net income of $57,000. They had reported earnings before…

A: Net income = $57000 EBIT = $160,000 Tax rate = 40%

Q: Loans and 14,130 10,220 borrowings a Deferred tax liability 1,010 960 15,140 11,180 Currente…

A: Following is the requisite cash flow statement

Q: Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 9.70% for a period of…

A: Given, The Face value of bond is $1000 Market price of bond is $1050.76 Coupon rate is 10%

Q: A bank invested $50 million in a two-year asset paying 10 percent interest per year and…

A: Banks take deposits from customers and pay them lower interest rate or take money from investors or…

Q: 9.7 Corporate Taxes Sheridan 3D printing company has had $145,000 in revenue for 2020 but also had…

A: There taxes on the income earned by the corporate in the country. But the expenses are to be…

Q: a. The cost of debt is % per year. (Round to four decimal places.) b. If Avicorp faces a 40% tax…

A: Cost of debt is expressed in terms of percentage which refers to the cost which a company bears for…

Q: The (AFTER-TAX COST OF DEBT / BEFORE-TAX COST OF DEBT) is the interest rate that a firm pays on any…

A: Interest Rate for lender is an income whereas same is cost for he borrower for the amount of debt.…

Q: BBC borrows a 19-year loan of $12,122 at 8% to finance a project. The corporate tax rate is 33%. If…

A: The Net Present Value: The net present value is the sum of the present values of all cash outflows…

Q: An investment of S110.000 in safe 10-year corporate bonds yieids an average of 12% per year, payable…

A: In this question, we will find out that how much his $110,000 be worth in 10 years in todays…

Q: a calendar-year C Corporation, is considering investing in a business expenditure with a cost of…

A: Tax Credit: Tax credits are an instrument to reallocate pay to individuals on lower compensation. A…

Q: In 2021. ABC Corp. borrowed money from the bank in the amount of Php 1 Million with an interest rate…

A: Interest is the income or expense on a loan given or borrowed by an entity. It is essentially the…

Q: 11. In 2019, LSP company reported a net income of $57,000. They had reported earnings before…

A: Net income (EAT) = $57000 EBIT = $150,000 Tax rate = 40%

Q: he Wendt Corporation reported $30 million of taxable income. Its federal tax rate was 21% (ignore…

A: Tax refers to compulsory payment made to government of country. In order to earn in country,…

Q: 4. If the firın wants to earn P70,000 in pre-tax profit, sales revenue must be equal to a. P110,000…

A: Variable costs are those costs that keeps on changing with change in the production level. This…

Q: The tax rates are as shown below: Taxable Income $0-50,000 50,00175,000 75,001 100,000 100,001…

A: Tax on income is the amount of charge to be paid to government calculated as a percentage of net…

Q: The income tax-free yield on a certain municipal bond is 7% per year. Thistranslates into…

A: Future value represents the future worth of existing cash flows. It is determined by compounding…

Q: t. Calculate your annual tax. Calculate the extra tax that you would pay per year if your annual…

A: Information Provided: Taxable income = $100,000 MTR = 50% ATR = 35%

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

How much debt Is outstanding if the present value of
a perpetual tax shield is $350,000, the tax rate is
21% and the interest rate on the debt is 10%?
O $300,000
O$1428,571
O$3.000,000
O$1.666.667

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 a) 101.36 b) 46.37 c) 158.33 d) 82.85
49) Find the interest on P5000 at 7% for 3 years. A. P11,666.67 B. P10,500 C. P2,142.86 D. P1,050 50) How much was borrowed if the interest at 12% after 4 years is P6,000? A. P12,500 B. P18,000 C. P20,000 D. P2000,000
Problem 8. What is the equivalent worth in year 5 of the following series of income and disbursements, if the interest rate is 10% per year? Year Income, S 0 0 1-5 6000 6-8 6000 9-14 8000 Answer: Equation: CFD: Expense, S 9000 6000 3000 5000
D=R-(Rx T) or D= Rx (1-T) Assume that Bob's Sporting Store borrows $100,000 at an interest rate of 7% and has a marginal tax rate of 40%. What will their actual cost of debt be?
1. You have the following information Interest charges = JD 50 000 per year Tax rate = 40% Net Income= JD 90 000 Required: What is the fim's times-interest-earned (TIE) ratio?
Question 2 Suppose you have a credit card with a 14% interest rate with monthly compounding, a home equity loan with a 7% interest rate with monthly compounding, and a bank savings account paying a 5% interest rate with annual compounding (all interest rates are quoted as Annual Percentage Rates). Your income tax rate is 40%. Only the interest on the savings account is taxable, and only the interest on the home equity loan is tax-deductible. What is the effective after-tax interest rate of each instrument, expressed as an annual rate? Suppose you are considering purchasing a new car and are offered a car loan with a 4.8% interest rate (Annual Percentage Rate) and monthly compounding (which is not tax-deductible). Should you take the car loan?
Using the same data for 2 parts: Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21% Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 Part A) Discount the year 4 expected payment back to time 0 (today). a) 9.31 b) 10.11 c) 13.65 d) 6.50 Part B) Calculate the Tax Shield a) 101.36 b) 46.37 c) 158.33 d) 82.85
n 3. What difference does compounding make? You have a $10 000 debt. Calculate the interest and amount for each. Time Interest Amount Interest Compounded rate 7% 7% 7% 7% 7% Simple (n/a) Annually Semi-annually Monthly Daily 3 years 3 years 3 years 3 years 3 years 4. What difference does the interest rate (and compounding) make? You have a $10.000 debt. Calculate the interest and amount for each.
Calculate the annual change in interest expense that would occur for a drop in interest rates from 6% to 4% for a borrower with $5,000,000 in variable-rate debt. a. -$100,000 Ob. $200,000 O c. $300,000 d. $100,000
Q6. A debt of $ 5700 is due, with interest at 2 8% in three years. It is agreed that the loan will be paid with payment of $X in one year and $ 3,000 in two years. If the money is worth ja = 4%, what is the value of X? %3D
Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 Group of answer choices 101.36 158.33 82.85 46.37
12.) Find the simple interest on a loan of P65,000.00 if the loan is given at a rate of 8% and is due in 6 years and 3 months. A. $3,250.00 C. P32,500.00 B. P31,200.00 D. P46,800.00