SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN: 9780357391266
Author: Nellen
Publisher: Cengage
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Mary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. (Ignore income taxes in this problem). The data pertaining to her investment opportunity are: (see attached image).
Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the net present value of this investment?
Olivia sets up her home design company as a corporation. She expects to generate cash flows of $500,000 per year. She will fund the corporation with $4,500,000 and the corporation will be funded entirely with equity. Assume Olivia faces a tax rate of 30%. Using a discount rate of 8%, what is the NPV of the company? Responses -$125,000 -$125,000 $0 $0 $1,750,000 $1,750,000 -$1,750,000
Camila Juárez owns a successful law firm, her core business is corporate law, but
occasionally Camila also works with mandates from wealthy clients requesting
assistance in private legal matters. You are Camila's financial advisor, and she asks
you to help her decide which of the private mandates she should accept.
You estimate that Camila's opportunity cost of capital is 15% per effective annual
and that she gives up $100,000 in monthly income from corporate work (assume
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Camila is also interested in working for another private client B who is willing to
pay her $140,000 per month, at the end of each month after receiving the
mandate. This mandate would last 6 months, during which time Camila would
receive monthly cash flows of $140,000. However, this job requires Camila to do
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- Claire is planning annual end of year withdrawals from her tax-free account after retirement for 35 years. She has Principal of $755,000, Investment return is 6%, Initial withdrawal $40,000 and annual increase of withdrawal $1,000. Show the work if Claire is possible to continue withdrawing for 35 years? In order for her to do that, what does she have to do?( show excel function & cell reference)arrow_forwardMary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. (Ignore income taxes in this problem). The data pertaining to her investment opportunity are: (see attached image). Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the total cash inflow that comes JUST in year 6? Do not include the annual cash flows from the earlier problem.arrow_forwardMary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. (Ignore income taxes in this problem). The data pertaining to her investment opportunity are: (see attached image). Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the annual NET savings?arrow_forward
- Komiko Tanaka invests $14,500 in LymaBean, Incorporated. LymaBean does not pay any dividends. Komiko projects that her investment will generate a 10 percent before-tax rate of return. She plans to invest for the long term. How much cash will Komiko retain, after taxes, if she holds the investment for five years and then she sells it when the long-term capital gains rate is 15 percent? What is Komiko's after-tax rate of return on her investment in part (a)?arrow_forwardMaria Turner just graduated from college with a degree in accounting. She planned to enroll immediately in the master's program at her university but has been offered a lucrative job at a well-known company. The job is exactly what Maria hoped to find after obtaining her graduate degree. In anticipation of master's program classes, Maria already spent $450 to apply for the program. Tuition is $8,000 per year, and the program will take two years to complete. Maria's expected salary after completing the master's program is approximately $60,000. If she pursues the master's degree, Maria would stay in her current home that is near the campus and costs $600 per month in rent. She also would remain at her current job that pays $25,000 per year. Additionally, Maria's immediate family is nearby. She spends considerable time with family and friends, especially during the holidays. This would not be possible if she accepts the job offer because of the distance from her new location. The job…arrow_forward
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