Chapter Questions Financial Management

Chapter Questions 2.1 An investor tardily purchased a affirm stick around that mode counts 9%. The investor is in the 36% give federal and adduce tax income income bracket. What is the bonds aft(prenominal) tax tax return? The takings on many investitures including corpo coiffure bonds is often called yield. To visualize the by and by(prenominal) tax yield we shoot to multiply the pretax yield by the combined federal and state tax bracket data. This gives us the balance of the pretax yield that allow for go to taxes. afterwards subtracting this issue forth from the pretax data we get the afterwards tax (http://www.ehow.com/how_5016879_calculate-after-tax-yield.html#ixzz1o72GKTlZ). For this particular mannikin we prolong 9% pretax yield and 36% combined taxes .09 x .36 = .0324 (3%) .09-.0324 = .0576 (6%) 2.2The aim of fortune involving repayment of a debt determines the interest arrange of a bond. Because of its tax exemptions municipal bonds tend to have a higher(prenominal) yield on investment than do merged bonds (http://www.e-personalfinance.com/types-of-bonds/municipal-bonds-vs-corporate-bonds). In this particular case municipal bonds are of equal happen and yield 6%. An investor would favour a rate that equals the municipal yield to the corporate after tax yield. 8% corporate yield 6% municipal yield After Tax Yield = nonexempt Interest Rate × (1 tax rate) (http://allfinancialmatters.

com/2006/10/20/how-to-calculate-tax-equivalent-yield/) 8% (1-tax rate) = after tax yield (6%) 8(8-tax rate) = 6 2= 8Tax rate Tax rate = 2/8 = .25 2.5 Kendall Corners Inc recently reported net income of $ 3.1 million, and derogation of $500,000. What was its net hard currency current? Assume it had no amortisation expense. In order to calculate net cash persist we need to add the non cash expenses back to net electronic network (http://blog.arborinvestmentplanner.com/2011/05/what-is-net-cash- course/) Net cash flow = Net income + dispraise Net Income = 3100000, depreciation = 500000 NCF = 3100000 + 500000 NCF = 3600000 = $3.6 million 3.1 Greene Sisters has a DSO of 20 days....If you desire to get a abounding essay, order it on our website: Ordercustompaper.com

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