Question 8 Given a tax rate of 15% for income up to $50,000, a tax rate of 25% f

Question

Question 8

Given a tax rate of 15% for income up to $50,000, a tax rate of 25% for income between $50,001 and $75,000, and a tax rate of 34% for income between $75,001 and $100,000, and a tax rate of 39% for income above $100,001, if ABC Inc. reports taxable income of $175,000. How large is this firm's tax bill?

Select one:

a. $61,250

b. $48,750

c. $91,125

d. $51,500

e. $55,000

Question 9

Eight months ago, Turner purchased 100 shares of Delta Frames stock at a price of $46.25 a share. Delta pays a quarterly dividend of $2.10 a share. Today, Turner sold all of his shares for $49 per share. What is Turner's total capital gain on this investment?

Select one:

a. $355

b. $275

c. $155

d. $200

e. $180

Question 10

Watson's Automotive has a $375,000 bond issue outstanding that is selling at 85 percent of face value. Watson's also has 21,000 shares of common stock outstanding with a market price of $21 a share. What is the weight of the debt as it relates to the firm's weighted average cost of capital?

Select one:

a. 48 percent

b. 44 percent

c. 42 percent

d. 40 percent

e. 41 percent

Explanation / Answer

8.

How large is this firm's tax bill

=15%*50000+25%*(75000-50000)+34%*(100000-75000)+39%*(175000-100000)

=51500

the above is answer

9.

What is Turner's total capital gain on this investment

=100*(49-46.25)

=275

10.

What is the weight of the debt

=(375000*85%)/(375000*85%+21000*21)

=42% or 42 percent

the above is answer

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