Calculate expected tax savings

Assignment Help Finance Basics

Reference no: EM1356019

Suppose that Ashanti Gold Co. expects to produce a total of 1 million ounces of gold by the end of this year. Total manufacturing and operating cost will be $250 million and interest expenses will be $20 million. Ashanti forecasts the future gold price will be equally $250, $300, or $350. The firm's tax rate is 20 % when taxable income is equal to or less than $25 million, 30% when taxable income is greater than $25 million but less than $70 million, or 38% when taxable income is equal to or greater than $70 million. There is no tax obligation when the firm incurs negative profit. Assume that forward gold price is now $305 per ounce. If the firm decides to HEDGE 60 percent of its exposure to fluctuating gold price, how much will be the expected tax savings from this hedging activity?

Reference no: EM1356019

Questions Cloud

Security and ethical concerns in web-based tool : How could you use a wiki to collaborate with fellow students to improve this course? What security and ethical concerns would you have to consider if you implemented this classroom wiki?

Type of interview conduct for psychologist : As Ben's psychologist, what type of interview would you conduct? What diagnosis would you give him on AXIS I, II, and III and why?

Prepare journal entries for phillips : Condensed balance sheets for Phillips Company and Solina Company on January 1, 2007, are as follows: Prepare the journal entries on the books of Phillips to record the acquisition of Solina Company's net assets

Determine a global beta for portfolio : Determine a global beta for his portfolio and holds a portfolio that is well-diversified with international investments, which performance measure is more appropriate,

Calculate expected tax savings : Assume that Ashanti Gold Corporation expects to produce a total of one million ounces of gold by the end of this year. Total manufacturing and operating cost will be $250 million and interest expenses will be $20 million.

How many units of each component ordered from each supplier : If the Edwards production plan for the next period includes 1000 units of component 1 and 800 units of component 2, how many units of each component (C1, C2) should be ordered from each supplier (S1, S2, S3)?

Expalin crisis management : Do you believe the acts of the mayor of NYC and the actions of airline pilot Captain Sullenberger were important in mitigating the anxiety on these disasters?

Diagnosis with the diagnostic statistic manual : You decide to prepare for these interviews by reviewing some of the basics of assessment and diagnosis with the Diagnostic Statistic Manual IV (DSM-IV).

Explain how would one determine the opportunity cost : President Bill Clinton assigned his wife the task of developing a national health insurance plan to increase the availability of medical care for the poor. Explain how would one determine the opportunity cost of the proposal.

User Account

All Pages