The Carey State Bank has purchased a bank-qualified municipal bond with a yield of 6%. This bank has had to borrow funds to make this purchase at a cost of 5.35%. This bank is in the 40% tax bracket. What is the net after-tax return on this bank-qualified municipal bond? Under IRS rules if a muni bond is bank qualified then 80% of the interest expense associated with funding the investment is tax deductible. A. none of the responses are correct B. 2.85% C. 2.36% D.6.00% E. 2.43%

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? For this analysis, ignore the effect of property taxes on the land. Below are the factors for the compound amount of $1 and compound value of annuity payments at the end of five years: Interest Rate 4% 5% $1 Compounded for Five Years…

The Landers Corporation needs to raise $1.00 million of debt on a 25-year issue. If It places the bonds privately, the Interest rate will be 11 percent. Thirty thousand dollars in out-of-pocket costs will be incurred. For a public issue, the Interest rate will be 10 percent, and the underwriting spread will be 4 percent. There will be $100,000 in out-of-pocket costs. Assume Interest on the debt is paid semiannually, and the debt will be outstanding for the full 25-year period, at which time it will be repaid. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. For each plan, compare the net amount of funds initially available-Inflow-to the present value of future payments of Interest and principal to determine net present value, Assume the stated discount rate is 14 percent annually. Use 7.00 percent semiannually throughout the analysis. (Disregard taxes.) Note: Assume the $1.00 million needed…

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%…