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5 In the current year (year o), Amisha became a shareholder in Sultan Inc., a calendar years corporation, by contributing $15,000 cash in exchange for
5 In the current year (year o), Amisha became a shareholder in Sultan Inc., a calendar years corporation, by contributing $15,000 cash in exchange for stock. Shortly before the end of the year, Sultan's CFO notified Amisha that her pro rata share of ordinary loss for the year would be $55,000. Amisha immediately loaned $40,000 to Sultan in exchange for a two-year, interest-bearing corporate note. Consequently, she had enough stock and debt basis to allow her to deduct the $55,000 loss on her current year return. In each case, assume she has a 35 percent marginal tax rate on ordinary income, a 15 percent rate on capital gains, and a 6 percent discount rate. Use Appendix A. 1 points eBook Required: a. Compute the NPV of Amisha's cash flow associated with her loan. For the next two years (years 1 and 2), Amisha's share of Sultan's ordinary income totaled $49,000, and Sultan did not distribute cash to its shareholders. However, it did repay the $40,000 loan plus $3,800 interest in year 2. b. Compute the NPV of Amisha's cash flow associated with her loan. For the next two years (years 1 and 2), Amisha's share of Sultan's ordinary income totaled $19,100, and Sultan did not distribute any cash to its shareholders. However, it did repay the $40,000 loan plus $3,800 interest in year 2. c. Compute the NPV of Amisha's cash flow associated with her loan. For the next two years (years 1 and 2), Amisha's share of Sultan's ordinary loss totaled $11,400. In year 2, the corporation declared bankruptcy and defaulted on all its debts, including the loan from Amisha Print References Complete this question by entering your answers in the tabs below. Required A Required B Required Compute the NPV of Amisha's cash flow associated with her loan. For the next two years (years 1 and 2), Amisha's share of Sultan's ordinary income totaled $49,000, and Sultan did not distribute cash to its shareholders. However, it did repay the $40,000 loan plus $3,800 interest in year 2. (Use appropriate factors from the Appendix A. Round intermediate calculations to the nearest whole dollar amount.) Show less NPV of cash flows
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