Wentdt Corporation Case Study

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Q (a): An investor recently purchased a corporate bond which yields 9%. The investor is in the 36% combined federal and state tax bracket. What is the bond's after-tax yield?(b): Corporate bonds issued by corporation currently yield 8%. Municipal bond of equal risk currently yields 6%, At what tax rate would an investor be indifferent between these two bonds? Thanks in advance

.a- 9%(1 ' 0.36) = 5.76% or 5.8%

b- Corps Bond Yield=(Municipal Yield)/(1- Taxation rate)get an answer of .25 or 25%

Complete Chapter 2 problem, 2-8, p. 79

The Wendt Corporation had $10.5 million of taxable income.a. What is the company¶s federal income tax bill for the year?b. Assume the firm receives an additional $1 million of interest income from
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It had 2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?

Net income of 1.8 is 60% of the income before taxes of 3 mil.
EBITDA of 7.5 less net income before taxes of 3 mil is 4.5.
Less interest of 2 mil is 2.5 million left for Deprecitation and amoritization.

2.5 million is your answer.

Pearson Brothers recently reported an EBITDA of 7.5 million and net income of 1.8 million.?

It had 2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?

What are the formula's you used?

The taxable income would be 7.5 less 2 million less depreciation and amortization. so 5.5-1.8 is the total available to pay taxes and depreciation.
So you have 370,000 to pay depreciation and taxes.
So depr will be 250K leaving taxes on 200K of 120K
3.7-Depr=(5.5-Depr)*40%
3.7-2.5=(5.5-2.5)*40%
(2.0)*40%=1.2
Proof=
5,500,000 EBITDA
(2,000,000) Interest
(2,500.000)Depr & Amortization
3,000,000
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Retained earnings, year 1 $632MM
Add Net Income, year 2 35MM
Less Dividends year 2 (2)MM

Retained earnings, year 2 $665MM

its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous year, its balance sheet showed $780 million of retained earnings. What were the total dividends paid to shareholders during the most recent year?
Finance
Answers (1) • [pic] Not yet rated Anonymous - 14 minutes later This is an easy question, free points on the exam. It's actually more of an accounting questions than finance...

You need to know this formula to answer the question Beginning Retained Earnings + Net Income - Dividends Equals Ending Retained Earnings

We are given everything in this problem but the dividends Beginning Retained Earnings (780M) +Net Income (50M) - Dividends (?) Equals Ending Retained Earnings (810M)

To solve for dividends start with... 780M + 50M - Dividends = 810M

830M - Dividends = 810M

- Dividends = 810M - 830M

- Dividends = -

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