Question 5.

Dr. Payne helped start Surgical Inc. 15 years ago. At the time, he purchased 380,000 shares of stock at one dollar per share. In 20XX, he has the opportunity to sell his interest in the company to Medical Technology for $35 a share. His marginal tax rate would be 30 percent. Assume a capital gain exemption limit of $500,000 is available. a. If he sells his interest, what will be the value for before-tax profit, taxes, and aftertax profit? (Enter all values as positive value.) Value Before-tax profit Capital gains taxes Aftertax profit b. Assume, Instead of cash, he accepts stock valued at $35 per share. He holds the stock for five years and then sells it for $69.50 (the stock pays no cash dividends). What will be the value for before-tax profit, taxes, and aftertax profit? (Enter all values as positive value.) Value Before-tax profit S Capital gains taxes S Aftertax profit c. Using a(n) 13 percent discount rate what is the present value of the after-tax profit figure in part b to part a? (Round the final answer to the nearest whole dollar.) Aftertax profit $