7- Which of the following statements is CORRECT a. Proprietorships b. In any par

Question

7- Which of the following statements is CORRECT a. Proprietorships b. In any partnership, every partner has the same rights are subject to more regulations than corporations every other partner c. Corporations of all types including S-Corp are subject to the corporate d. Proprietorships and partnerships generally have a tax advantage ovr nglng ction(s) would most likely reduce potential conficts between stocekholders a. Pay managers fixed annual cash salaries and give them no stock options. of corporate takeovers c. d. Direct intervention by shareholders b and e are correct 19, Bauer Software's current balance sheet shows total common equity of $4,000,000. The company has 450,000 shares of stock outstanding, and they sell at a price of $21.00 per share. By how much do the 20. Which of the following is a primary market transaction? a. You sell 200 shares of IBM stock on the NYSE through your broker You buy 200 shares of IBM stock from your brother. The trade is not made througha broker--you just give him cash and he gives you the stock c. IBM issues 2,000,000 shares of new stock and sells them to the public d. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. 21. Griffey Communications recently realized a total taxable income of $285,000 Percentage on e B Tax on Base Up to $50,000 $50,000-$75,000 $75,000-S100,000 S100,000-$335,000 $335,000-$10,000,000 $10,000,000-$15,000,000 $15,000,000-$18,333,333 Over $18,333,333 13,750 22,250 113,900 3,400,000 5,150,000 6,416,667 39 38 Using the corporate tax schedule above, what is Griffey's tax liability? $84,300 d $93,400 a $65,000 b. $77,000 2 Byrd Lumber has 2 million shares of common stock outstanding that sell for $17 a share. If the company has $40 million of common equity on its balance sheet, what is the company's Market Value Added MVA) a. -$5,415,000 b. -$5,700,000 C.$6,000,000 d -$6,300,000

Explanation / Answer

Answer 17 d Propreitorships and partnerships generally have a tax advantage over corporations Answer 18 b Threat of corporate takeover. c Direct interventions by shareholders. d b and c are correct Answer 19 d $12.11 1 Total Common Equity $4,000,000.00 2 Total Number of Shares Outstanding 450,000 3 Selling Price of the Share $21 4 Book Value of the Share $8.89 5 Difference between Firms Market Value and Book Value (3-4) $12.11 Answer 20 c IBM issues 2,000,000 shares of new stock and sells them to the public Answer 21 Total Taxble Income of Griffey Communication $285,000.00 Tax on Base of Bracket Percentage on Excess above Base Excess Tax above Base Total Tax Upto $50,000.00 0 15% $7,500.00 $7,500.00 $50,000.00 $75,000.00 $7,500 25% $6,250.00 $13,750.00 $75,000.00 $100,000.00 $13,750 34% $8,500.00 $22,250.00 $100,000.00 $285,000.00 $22,250 39% $72,150.00 $94,400.00 d Hence the total tax liability of Griffey Communication is $ 94,400.00 Answer 22 Market value added (MVA) is the difference between the current market value of a firm and the capital contributed by investors. Current Market Value (2 Million X $ 17) $        34,000,000.00 Capital Contributed by the investor $40,000,000.00 MVA $        (6,000,000.00) c MVA $ (6,000,000.00) Answer 1 c ability to raise capital Answer 2 c lower the reserve ratio Answer 3 a One of the benefits from investing in a mutual fund is the risk diversification Answer 4 d The corporate tax system favours equity financing, as dividend paid are deductible from corporate taxes Answer 5 c Divident paid reduce the taxable income that is reported on Company's income statement Answer 6 a Maximize shareholders' wealth Answer 7 b Capital Budgeting mainly concerns with managing financial issues for a firm or a corporation.

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