Suppose that the marginal tax rate is 15%. If a farmer decide to purchase a combine it will increase his revenue by $6,000 per year, but it will also increase his expenses by $1,000 per year. The before tax rate on this investment is 25%. The life this investment is 6 years. What is the present value of the af tax net return? $14,133 $12,544 $16,084

Suppose that the marginal tax rate is 15%. If a farmer decide to purchase a combine it will increase his revenue by $6,000 per year, but it will also increase his expenses by $1,000 per year. The before tax rate on this investment is 25%. The life this investment is 6 years. What is the present value of the af tax net return? $14,133 $12,544 $16,084

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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What is the payback if an investment’s cost is $45,000 and the after-taxbenefit is $2,000 per year?
Assume that you purchase a property for $2,000,000 and it generates $15,000 per month of rental income and you sell it after 15 years for $2,275,000. What is your yield (annual rate of return) on this investment?
1. Assume that you purchase a property for $2,000,000 and it generates $25,000 per month of rental income and you sell it after 15 years for $3,275,000. What is your yield (monthly rate of return) on this investment?
What is the payback if the investment is $22,000 and the after tax benefits are: Years 1 & 2 = $2,500 per year Years 3 & 4 = $3,500 per year Years 5 & 6 =$4,000 per year Years 7 & 8 = $4,500 per year Year 9 = $3,000 Year 10 = $1,500
Please answer using life-cycle problem. Suppose the interest rate is 5%, the income tax rate 35%, the tax rate on investment income is 20%, and the investment horizon 40 years. (a) What is the final payoff after tax if $100 pre-tax income is invested in a regular savings account? (b) What is the final payoff after tax if $100 pre-tax income is invested in a retirement account? (c) What is the final payoff after tax if $100 pre-tax income is invested in a Roth account?
Suppose you invest $3,000 today and receive $10,000 in 25 years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the amount you will receive each year? a. What is the internal rate of return (IRR) of this opportunity? The IRR of this opportunity is%. (Round to two decimal places.) b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the amount you will receive each year? The periodic payment that gives the same IRR is $ (Round to the nearest cent.)
Suppose you invest $2,000 today and receive $11,000 in five years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $2,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has the same IRR as the first one, what is the amount you will receive each year?
2. Assume that you purchase a property for $2,450,000 and it generates $195,000 per year of rental income and you sell it after 30 years for $2,975,000. What is your yield (annual rate of return) on this investment?
Assume that at the beginning of the year, you purchase an investment for $7,200 that pays $100 annual income. Also assume the investment's value has decreased to $6,800 by the end of the year. (a) What is the rate of return for this investment? (Input the amount as a positive value. Enter your answer as a percent rounded to 2 decimal places.) Rate of return % (b) Is the rate of return a positive or negative number? Positive O Negative
An investor has an opportunity to buy a commercial property and to sell it after 15 years. Rents from the property will be $24,000 and he expects them to increase at a rate of 3% per year annually. His required rate of return on this investment is 12%. At what price would he be indifferent to buying or not buying the investment? Round off to the nearest $1. Select one: O a. $213,656 O b. $800,000 O c. $171,429 O d. $240,000
Sardor has been offered an investment that will pay him $500 three years from today. If his opportunity cost is 7% compounded annually, what value should he place on this opportunity today? 103. 102. A company has cost of debt of 6% and cost of equity of 15%. In this country, the cornorate income tax rate is 209 If the deht to og WAC CO
Assuming your fixed cost per year are $10,000 are you making enough profit to pay that amount ?

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