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A mortgage lender attempted to increase its business by marketing its subprime mortgage. This mortgage is designed for people with a less-than-perfect credit rating, and the interest rate is higher to offset the extra risk. In the past year, 20% of these mortgages resulted in foreclosure as customers defaulted on their loans. A new screening system has been developed to determine whether to approve customers for the subprime loans. When the system is applied to a credit application, the system will classify the application as "Approve for loan" or "Reject for loan." When this new system was applied to recent customers who had defaulted on their loans, 90% of these customers were classified as "Reject." When this same system was applied to recent loan customers who had not defaulted on their loan payments, 70% of these customers were classified as "Approve for loan."
(a) If a customer did not default on a loan, what is the probability that the rating system would have classified the applicant in the reject category?
(b) If the rating system had classified the applicant in the reject category, what is the probability that the customer would not default on a loan?
David, a lawyer (age 65), is married and files a joint return. His spouse, Susan, is also 65 years of age. During the current year he engages in the following activities and transactions.
They have 2 children (ages 14 and 16) who have no taxable income. If they can legally shift $6,000 in taxable income to each child, how much does the family save in taxes?
Assume a tax rate of 40% and a discount rate of 14%. If this machine can be sold for $15,000 at the end of year 7, what is the after tax salvage value?
Evaluate what is tax effect fir Brian and what will be basis of each of four batches of new stock?
Prepare a client memo that recommends revisions to Tangy Corporation's existing compensation system for both its employees and executive groups.
What would the tax rate need to be in Year 2 to make the taxpayer indifferent?
The price of computer chips decreases significantly, enabling manufacturers of hard drives to produce more hard drives. How will this affect the market for hard drives?
Evaluate the impact, positive or negative, that your proposed eliminations would have on corporations and the economy. Give evidence to support your position.
Should tax considerations play a role in Tom's choice to buy disability insurance through Acme or on his own? Explain.
how much extra depreciation will Alaska Freight get to deduct for the first year as compared with the straight-line method?
You are a CPA and a tax senior at Roll Accounting Inc. (RAI), an accounting professional corporation in Canada. It is now March 31, 2014 and you have just finished meeting with Mike Dee, a partner at RAI. Mike has some tax issues that he wants you to..
Advise how each of the items (i) to (xiii) would be treated for tax purposes. You must cite the appropriate section of the Acts and relevant court authorities to support your treatment.
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