LO 4-2 LO 4-2 LO 4-2, 4-3 What are the tax a n d the average rate for a single individual with $197.300 What are the tax hit dhe vegetaste for a head of household with 5445 100 t he income M 4. Ms. JK recently made etly medeh AMIN income tax rate is 37 percent A r les 12 percent. In each o the owing can the n The gift consisted of rental property in $19.100 annual rental income to owner. The girt consisted of a $4.625 interest coupon from a corporate bond owned Ms. JK The gift consisted of a $2.200 rent check written by the tenants who lease rental property owned by Ms. JK The consisted of a corporate bond pa s 300 annual interest to its owner. S. Firm A has a 21 percent marginal tax rate and Firm has a 28 percent marginal tax rate Firm A owns a controlling interest in Farm 2. The owners of Firm A decide to incur a $9.500 deductible expense that will benefit both firms. Compute the aftertax cost of the expense assuming that a. Firm A incurs the expense b. Firm Z incurs the expense 6. Company G, which has a 30 percent marginal tax rate owns a controlling interest in Company J. which has a 21 percent marinal tax rate. Both companies perform engineering services. Company G is negotiating a contract to provide services for a client. Upon satisfactory completion of the services the client will pay $85.000 cash Compute the after tax cash from the contract assuming that a. Company G is the party to the contract and provides the services to the client. b. Company J is the party to the contract and provides the services to the client. Company is the party to the contract, but Company G actually provides the services to the client. 7. BPK Inc. and OPK Inc. are owned by the same family, BPK's marginal tax rate is 21 percent, and OPK's marginal tax rate is 32 percent BPK is about to incura $72,000 deductible expense that would benefit both corporations. OPK could obtain the same mutual benefit by incurring a $82.500 deductible expense. Which corporation should incur the expense? 8. Firm M and Firm N are related parties. For the past several years, Firm M's marginal tax rate has been 30 percent, and Firm N's marginal tax rate has been 21 percent. Firm Mis evaluating a transaction that will generate $10,000 income in each of the next three years Firm M could restructure the transaction so that the income would be earned by Firm N. Because of the restructuring, the annual income would decrease to $9.000. Should Firm M restructure the transaction! 9. Company Khas a 30 percent marginal tax rate and uses a 7 percent discount rate to compute NPV. The company started a venture that will yield the following before tax cash flows year 0, $12,000 year 1. $21.000; year 2. $24,000; year 3.817,600. a. If the before-tax cash flows represent taxable income in the year received, compute the NPV of the cash flows. Compute the NPV ir Company K can defer the receipt of years 0 and 1 cash flows/ income until year 2. (It would receive no cash in years 0 and 1 and would receive $57,000 cash in year 2.) LO 4-2 LO 4-2 LO 4-4 LO 4-2 LO 4-2 LO 4-2, 4-3 What are the t ne tax liability, the marginal h ermal rate, and the rate and the average tax rate for a single individual with $197.200 table income! . What are the tax liability, the tax liability, the marginal rate and the average tax rate for a head of household with $446,300 taxable income! 4. Ms. JK recently made it to be 10 her 10 o ld daughter. Alison MS Alison Ms. JK's marginal income tax rate is 37 percent and A n al income tax rate is 12 percent. In cach of the following cases, compute the annual income tax savings resulting to The gift consisted of rental property ratine $ 19.100 annual rental income to its owner. b. The gift consisted of a $4.625 interest from a corporate bond owned by Ms. JK C. The gift consisted of a $2.200 rent check written by the tenants who lease rental property owned by Ms. JK . The gift consisted of a corporate bond paving $13.300 annual interest to its owner. 5. Firm A has a 20 percent marginal tax rate and Firm Z has a 28 percent marginal tax rate. Firm A owns a controlling interest in Firm ZThe owners of Firm A decide to incur a $9.500 deductible expense that will benefit both firms. Compute the after-tax cost of the expense assuming that: a. Firm A incurs the expense. b. Firm Z incurs the expense. 6. Company G, which has a 30 percent marginal tax rate, owns a controlling interest in Company J, which has a 21 percent marginal tax rate. Both companies perform engineering services. Company G is negotiating a contract to provide services for a client. Upon satisfactory completion of the servises the client will pay $85,000 cus Compute the after-tax cash from the contract assuming that a. Company G is the party to the contract and provides the services to the client. b. Company J is the party to the contract and provides the services to the client. c. Company J is the party to the contract, but Company G actually provides the services to the client. 7. BPK Inc. and OPK Inc. are owned by the same family. BPK's marginal tax rate is 21 percent, and OPK's marginal tax rate is 32 percent. BPK is about to incur a $72,000 deductible expense that would benefit both corporations. OPK could obtain the same mutual benefit by incurring a $82.500 deductible expense. Which corporation should incur the expense? 8. Firm M and Firm N are related parties. For the past several years, Firm M's marginal tax rate has been 30 percent, and Firm N's marginal tax rate has been 21 percent. Firm M is evaluating a transaction that will generate $10,000 income in each of the next three years Firm M could restructure the transaction so that the income would be earned by Firm N. Because of the restructuring, the annual income would decrease to $9,000. Should Firm M restructure the transaction? 9. Company K has a 30 percent marginal tax rate and uses a 7 percent discount rate to compute NPV. The company started a venture that will yield the following before-tax cash flows year 0, $12,000 year 1, $21,000; year 2. $24,000; year 3. $17,600. a. If the before-tax cash flows represent taxable income in the year received, compute the NPV of the cash flows. b. Compute the NPV if Company K can defer the receipt of years 0 and 1 cash flows/ income until year 2. (It would receive no cash in years 0 and 1 and would receive $57,000 cash in year 2.) LO 4-2 LO 4-2 LO 4-4 LO 4-2 LO 4-2 LO 4-2, 4-3 What are the tax a n d the average rate for a single individual with $197.300 What are the tax hit dhe vegetaste for a head of household with 5445 100 t he income M 4. Ms. JK recently made etly medeh AMIN income tax rate is 37 percent A r les 12 percent. In each o the owing can the n The gift consisted of rental property in $19.100 annual rental income to owner. The girt consisted of a $4.625 interest coupon from a corporate bond owned Ms. JK The gift consisted of a $2.200 rent check written by the tenants who lease rental property owned by Ms. JK The consisted of a corporate bond pa s 300 annual interest to its owner. S. Firm A has a 21 percent marginal tax rate and Firm has a 28 percent marginal tax rate Firm A owns a controlling interest in Farm 2. The owners of Firm A decide to incur a $9.500 deductible expense that will benefit both firms. Compute the aftertax cost of the expense assuming that a. Firm A incurs the expense b. Firm Z incurs the expense 6. Company G, which has a 30 percent marginal tax rate owns a controlling interest in Company J. which has a 21 percent marinal tax rate. Both companies perform engineering services. Company G is negotiating a contract to provide services for a client. Upon satisfactory completion of the services the client will pay $85.000 cash Compute the after tax cash from the contract assuming that a. Company G is the party to the contract and provides the services to the client. b. Company J is the party to the contract and provides the services to the client. Company is the party to the contract, but Company G actually provides the services to the client. 7. BPK Inc. and OPK Inc. are owned by the same family, BPK's marginal tax rate is 21 percent, and OPK's marginal tax rate is 32 percent BPK is about to incura $72,000 deductible expense that would benefit both corporations. OPK could obtain the same mutual benefit by incurring a $82.500 deductible expense. Which corporation should incur the expense? 8. Firm M and Firm N are related parties. For the past several years, Firm M's marginal tax rate has been 30 percent, and Firm N's marginal tax rate has been 21 percent. Firm Mis evaluating a transaction that will generate $10,000 income in each of the next three years Firm M could restructure the transaction so that the income would be earned by Firm N. Because of the restructuring, the annual income would decrease to $9.000. Should Firm M restructure the transaction! 9. Company Khas a 30 percent marginal tax rate and uses a 7 percent discount rate to compute NPV. The company started a venture that will yield the following before tax cash flows year 0, $12,000 year 1. $21.000; year 2. $24,000; year 3.817,600. a. If the before-tax cash flows represent taxable income in the year received, compute the NPV of the cash flows. Compute the NPV ir Company K can defer the receipt of years 0 and 1 cash flows/ income until year 2. (It would receive no cash in years 0 and 1 and would receive $57,000 cash in year 2.) LO 4-2 LO 4-2 LO 4-4 LO 4-2 LO 4-2 LO 4-2, 4-3 What are the t ne tax liability, the marginal h ermal rate, and the rate and the average tax rate for a single individual with $197.200 table income! . What are the tax liability, the tax liability, the marginal rate and the average tax rate for a head of household with $446,300 taxable income! 4. Ms. JK recently made it to be 10 her 10 o ld daughter. Alison MS Alison Ms. JK's marginal income tax rate is 37 percent and A n al income tax rate is 12 percent. In cach of the following cases, compute the annual income tax savings resulting to The gift consisted of rental property ratine $ 19.100 annual rental income to its owner. b. The gift consisted of a $4.625 interest from a corporate bond owned by Ms. JK C. The gift consisted of a $2.200 rent check written by the tenants who lease rental property owned by Ms. JK . The gift consisted of a corporate bond paving $13.300 annual interest to its owner. 5. Firm A has a 20 percent marginal tax rate and Firm Z has a 28 percent marginal tax rate. Firm A owns a controlling interest in Firm ZThe owners of Firm A decide to incur a $9.500 deductible expense that will benefit both firms. Compute the after-tax cost of the expense assuming that: a. Firm A incurs the expense. b. Firm Z incurs the expense. 6. Company G, which has a 30 percent marginal tax rate, owns a controlling interest in Company J, which has a 21 percent marginal tax rate. Both companies perform engineering services. Company G is negotiating a contract to provide services for a client. Upon satisfactory completion of the servises the client will pay $85,000 cus Compute the after-tax cash from the contract assuming that a. Company G is the party to the contract and provides the services to the client. b. Company J is the party to the contract and provides the services to the client. c. Company J is the party to the contract, but Company G actually provides the services to the client. 7. BPK Inc. and OPK Inc. are owned by the same family. BPK's marginal tax rate is 21 percent, and OPK's marginal tax rate is 32 percent. BPK is about to incur a $72,000 deductible expense that would benefit both corporations. OPK could obtain the same mutual benefit by incurring a $82.500 deductible expense. Which corporation should incur the expense? 8. Firm M and Firm N are related parties. For the past several years, Firm M's marginal tax rate has been 30 percent, and Firm N's marginal tax rate has been 21 percent. Firm M is evaluating a transaction that will generate $10,000 income in each of the next three years Firm M could restructure the transaction so that the income would be earned by Firm N. Because of the restructuring, the annual income would decrease to $9,000. Should Firm M restructure the transaction? 9. Company K has a 30 percent marginal tax rate and uses a 7 percent discount rate to compute NPV. The company started a venture that will yield the following before-tax cash flows year 0, $12,000 year 1, $21,000; year 2. $24,000; year 3. $17,600. a. If the before-tax cash flows represent taxable income in the year received, compute the NPV of the cash flows. b. Compute the NPV if Company K can defer the receipt of years 0 and 1 cash flows/ income until year 2. (It would receive no cash in years 0 and 1 and would receive $57,000 cash in year 2.) LO 4-2 LO 4-2 LO 4-4