You bought a 5-year property class equipment for $20,000.00 and sold it after 3 years. Assume that the selling price of the equipment decreases uniformly by 5% each year. The equipment generated following income: $5,000, $5,500, and $4,500 in years 1 through 3, respectively. 5. Fill up the table below to show the after tax cash flow. Assume that you are already in the 28% income tax bracket. Use MACRS depreciation. Assume that depreciation recapture/loss is taxed at 15%. Yr. Income Depreciation Taxable Income After tax Income Тах cash flow

You bought a 5-year property class equipment for $20,000.00 and sold it after 3 years. Assume that the selling price of the equipment decreases uniformly by 5% each year. The equipment generated following income: $5,000, $5,500, and $4,500 in years 1 through 3, respectively. 5. Fill up the table below to show the after tax cash flow. Assume that you are already in the 28% income tax bracket. Use MACRS depreciation. Assume that depreciation recapture/loss is taxed at 15%. Yr. Income Depreciation Taxable Income After tax Income Тах cash flow

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

Chapter13: Investing In Mutual Funds, Etfs, And Real Estate

Section: Chapter Questions

Problem 9FPE

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What should you do if you own a piece of land that you bought 5 years ago for $50,000. The tax rate is 30% and you can assume you have sufficient other income to take advantage of all tax effects. Your after-tax discount rate is 7%.a. You can sell the land today for $200,000. b. You believe the land will be worth $275,000 in five years because you expect a new shopping center to be built next to your land, so You can wait and sell the land at that time (in 5 years).
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
A taxpayer can invest $1,000 in a money market fund that yields an annual pretax rate of return of 8% or buy an acre of land for $1,000 that appreciates at a 7% annual rate. The taxpayer plans to sell the land after 20 years and faces a 25% tax rate each year. (For purposes of this problem, ignore any risk differences between investments.) What is the after-tax accumulation at the end of 20 years from each investment? What is the annualized after-tax rate of return from each investment?
A speculator in land and property pays $186OCO for a house that he expects to hold for 10 years. $7.000 is spent in renovation and a monthly rent of $800 is collected from the tenants who live in the house (assume all rent is paid at the end of the year). Taxes are $2500 per year and maintenance costs are $1500 per year. What must the sales price be in 10 years to realize a 6% rate of return?
1) If you were to save and invest $1,000 a month in after-tax dollars and earn 6% before taxes annually, how much would you have at the end of 10 years, 20 years and 40 Years? Assume you had an effective tax rate on your investments of 30%. 2) If you were to invest $1,000 a month in pre-tax dollars in a 401K plan and earn 6% before taxes annually, how much pre-tax money would you at the end of 10 years, 20 years and 40 Years? 3) Assuming you had saved $2.0 million in your 401K pre-tax, how many years would it last if you withdrew 100K per year and you continued to earn 4%before taxes annually on any balances prior to withdrawal? How much would you owe in taxes if your retirement tax rate was 25%? How much would you have to meet expenses?
Answer each of the following independent questions. Ignore personal income taxes. Required: 1. Suppose you invest $4,000 in an account bearing interest at the rate of 12 percent per year. Complete the table to show how your accumulation grows each year to equal $7,896.00 after six years. 2. You have estimated that your educational expenses over the next three years will be $14,500 per year. Your account bears interest at 9 percent per year. Complete the table given below to show that $36,699.50 is the amount you need to fund your educational expenses. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Suppose you invest $4,000 in an account bearing interest at the rate of 12 percent per year. Complete the table to show how your accumulation grows each year to equal $7,896.00 after six years. (Round your answers to 2 decimal places.) Year Beginning Balance Interest 1 2 3 4 5 6 End Balance
Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Suppose you invest $4,100 in an account bearing interest at the rate of 10 percent per year. What will be the future value of your investment in five years? 2. Your best friend won the state lottery and has offered to give you $11,600 in four years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 8 percent annual interest. What is the present value of your friend’s future gift? 3. In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $68,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 4 percent per year in order to accumulate the $68,500 purchase price? 4. You have estimated that your educational expenses…
Cochran also has asked you to estimate Computrons EVA. She estimates that the after-tax cost of capital was 10% in both years.
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for this service. Over a period of 12 years, how much does Elaine gain from preparing her own tax return? Assume she can earn 5 percent on her savings. Use Exhibit 1- B. (Round time value factor to 3 decimal places and final answer to 2 decimal places.) Answer is complete but not entirely correct. Future value of total gain $1,002.78
What is the payback if an investment’s cost is $45,000 and the after-taxbenefit is $2,000 per year?
Imagine you just finished 30 years-old, earning $120,000 pre-tax per year paid at the end of each year. Assume you have no financial asset or explicit liabilities. Your salary grows 1% per year until you retire at the end of age 65 (35 full years of working). After retirement, you are entitled to receive a pension paying 50% of your last salary for the rest of your life (your pension would remain constant). Assume a valuation rate of 5% and a planning horizon to age 95 (30 full years of retirement). Your current subsistent consumption is $20,000 (paid at the end of the year). You expect your subsistent consumption to grow at rate of 2% until the end of age 95. Your goal is to maintain a constant discretionary consumption (standard of living) for the rest of your life. You should pay taxes according to the table below. Brackets AVERAGE tax rate $0 to $100,000 30% $100,0000 to infinity 40% Please answer: Part A: If you put your savings in a TFSA account, what is the highest real &…