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If ABC Company made $250,000 last year selling VCRs, using the TAX table above, a) How much will it pay in taxes? What is the average Tax Rate?

What is ABCs Marginal Tax Rate?

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254 Taxable income Tax Rate 50 – 50.000 154 550.001 – 75,000 5 75.001 – 100.000 34% SI00.001 – 335.000 394 5339.001 – 10.000.000 34% $10.000,001 – 15,000.000 35% 1. If ABC Company made $250,000 last year selling VCRs, using the Tax table above, (a) How much will it pay in taxes? (b) What is the Average Tax Rate? (c) What is ABCs Marginal Tax Rate? 2. Over the last 3 years you earned 5%, 7% and 9%. What is the Average Rate of Return of your investment? 3. XYZ Company’s only asset is cash of $8000. However, it has Accounts payable of $2000 and stocks worth another $2000. Calculate XYZ’s Current Ratio. 4. Given the following rates published yesterday: US Treasury 30year. Bond US Treasury 3year Notes US Treasury 1year Bill 12% 9% 6% Calculate Mr. John’s Risk Premium if he expects a rate of reurn of 10% on his 4months investment in an American Online security. 5. Given that the Beta Coefficient () of Chrysler is-97; American Online is 1.5; and Sears is 1.00. The three companies are each offering you a rate of 15% on their 30year bond. (a) Which one of the companies will you invest in, all things considered? (b) Why? (in no more than one sentence) 6. Complete this phrase “the lower the risk of any investment an investor is exposed to the return he/she should reasonably expect.” 7. What is the expected return of a Portfolio comprising of the following: Asset Portfolio Weight E(R) Expected Return A .25 15% B 25 20% с .30 10% D 20 35% 8. Use the following information to answer the next series of questions! Return on Security A Return on Security B Probability State 1 Boom Normal Bust 3 .6 1 12% 8% 4% -2% 2% 6% (@) What is the expected return on Security A? (b) What is the expected return on Security B? What is the expected return on a portfolio with weights of 60% in Security B and the remainder in Security A? (d) What is the Standard Deviation of Security A (e) What is the Standard Deviation of Security B Security A B с 1 30% 40% 10% Standard Deviation () Beta (B) Expected Return ECR) 2.6 1.5 .85 15% 14% 17% (a) Which security or asset has the largest total risk? (b) Which has the largest systematic risk? (c) Which should have the most risk premium? (d) Which is the best to invest in based on the capital asset pricing model? (e) Using appropriate computations why is the answer in “d” the best?

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Tags: expected return taxable income Business investment Finance For Business ABCs Marginal Tax Rate