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Thomas Wayne wants to know the best investment he should consider after factoring in the various tax impact. He will hold each investment for four
| Thomas Wayne wants to know the best investment he should consider after factoring in the various tax impact. | |||||||||||||||||
| He will hold each investment for four years. | |||||||||||||||||
| His marginal tax rate is 34% and for investments he uses a discount rate of 5%. | |||||||||||||||||
| He is exploring three different investment options. | |||||||||||||||||
| Option #1 | |||||||||||||||||
| Purchasing 10,000 shares for $250,000. He expects the corporation to pay a $1.25 per share dividend each year. He anticipates to sell the shares for $26.50 per share. | |||||||||||||||||
| Purchase Date | 12/31/2023 | ||||||||||||||||
| Sale Date | 12/31/2027 | ||||||||||||||||
| Enter the present value of after-tax cash flow here | |||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | |||||||||||||
| Cash Flows | |||||||||||||||||
| Tax Cost | |||||||||||||||||
| ATCF | |||||||||||||||||
| NPV | |||||||||||||||||
| Option #2 | |||||||||||||||||
| Purchasing a corporate bond with a face value of $260,000 for $250,000. The interest rate on the bonds is 6.3%, which is paid out on December 31 of each year. | |||||||||||||||||
| Purchase Date | 12/31/2023 | ||||||||||||||||
| Sale Date | 12/31/2027 | ||||||||||||||||
| Enter the present value of after-tax cash flow here | |||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | |||||||||||||
| Cash Flows | |||||||||||||||||
| Tax Cost | |||||||||||||||||
| ATCF | |||||||||||||||||
| NPV | |||||||||||||||||
| Option #3 | |||||||||||||||||
| Purchasing a municipal bond with a face value of $255,000 for $250,000. The interest rate on the bonds is 5%, which is paid out on December 31 of each year. | |||||||||||||||||
| Purchase Date | 12/31/2023 | ||||||||||||||||
| Sale Date | 12/31/2027 | ||||||||||||||||
| Enter the present value of after-tax cash flow here | |||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | |||||||||||||
| Cash Flows | |||||||||||||||||
| Tax Cost | |||||||||||||||||
| ATCF | |||||||||||||||||
| NPV | |||||||||||||||||
| Which option would you suggest and why? You shouldn't simply say because X is better, but why is it better and the others aren't as good? | |||||||||||||||||
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The Psychology Of People In Organisations
Authors: Angela Mansi, Melanie Ashleigh
1st Edition
0273755765, 9780273755760
