An Introduction to Accounting and Managerial Finance A Merger of Equals by Harold Bierman | 9789814273824 | 9814273821 | Holooly

Accounting for Business

An Introduction to Accounting and Managerial Finance A Merger of Equals

35 SOLVED PROBLEMS

Question: 11.P.1

(a) The corporate tax rate is 0.35. Complete the following table. ...

Verified Answer:

(a) The corporate tax rate is 0.35. Required ...

Question: 8.P.1

a. What is the present value of $1,000 due in ten years, discounted at 14 percent? b. What is the present value of $140 per year for a period of ten years if the rate of interest used to discount the payments back to the present is 14 percent? c. What is the sum of the two amounts obtained in parts ...

Verified Answer:

a.

(1.14)^{-10}

= 0.26974; therefor...

Question: 16.P.1

Assume a $1,000, 20-year convertible bond that has a contractual interest rate of 0.10. Straight debt pays 0.12. The corporate tax rate is 0.46. The stock price at time of issue is $20. The bond is callable at a price of $1,100 after one year. ...

Verified Answer:

(a) $20(1.25) = $25 conversion price.

\frac...

Question: 12.P.1

Assume that the A Corporation can obtain a 10-year noncancellable lease of $12,500 per year for an asset that it wants. The lease payment is due at the end of each year. The asset will have zero value at the end of 10 years The asset would cost $70,000 if purchased. It will earn gross cash flows of ...

Verified Answer:

Net cost of buying = $70,000 − 0.35($70,000)(0.813...

Question: 3.P.1

The following facts apply to the ABC Company in the year 20XX. 1. Stockholders invest $1,000,000. 2. The company buys land for $20,000 and a building for $380,000 in cash. 3. The company borrows $100,000 from the bank. The five-year note bears 14 percent interest per year. 4. The company purchases ...

Verified Answer:

Cash (1) 1,000,000 (2) 20,000 (3) 100,000 (2) ...

Question: 15.P.1

If the common stockholders of ABD Corporation are taxed at 0.52 and if they buy XYZ stock at $100, how much could the corporation ABD pay for XYZ stock and have the investors indifferent? They will hold and not sell. ...

Verified Answer:

x=\frac{100}{1-t_{p} } =\frac{100}{1-0.52} ...

Question: 8.P.2

If the bond of the previous problem paid 10 percent interest per year ($100), at what price would it sell? ...

Verified Answer:

$1,000 × 0.26974 = $269.74 $100 × 5.21614 = 521.61...

Question: 7.2

A machine is purchased for $10,000. The forecasted salvage is $456, and the forecasted removal cost is $200. The expected useful life of the machine is four years. Compute the annual depreciation charge using the straight-line procedure.(These figures will also be used for other methods discussed ...

Verified Answer:

Annual Depreciation = \frac{(Initial Cost −...

Question: 7.1

Establish the bases for the computation of depreciation, given the following facts: a. A building is purchased for an immediate payment of $10,000. The forecasted salvage is $500, and the forecasted removal cost is $200. ...

Verified Answer:

Answer to (a) Cost of Building ...

Question: 2.3

The ABC Company is to receive $1 a period for three periods, the first payment to be received one period from now. The time value factor is 0.10. Compute the present value of the annuity. ...

Verified Answer:

There are three equivalent solutions: a. From Appe...

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