Reference no: EM131192534
Investors tend to use a higher discount rate to value stocks compared to the discount rate they use to value bonds. Why do you think this is the case? Under what circumstances might an investor use a higher discount rate to value a particular bond compared to a particular share of equity? (Assume the bonds and equities are not from the same company.) (100 words please)
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What is the addition to retained earnings
: Billy’s Exterminators, Inc., has sales of $607,000, costs of $314,000, depreciation expense of $66,000, interest expense of $43,000, a tax rate of 35 percent, and paid out $78,000 in cash dividends. What is the addition to retained earnings?
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Corporations can do tax planning to minimize tax liability
: Identify two areas on Form 1120 where corporations can do tax planning to minimize tax liability. Examples include Dividends Received Deduction, Net Operating Losses, and Charitable Contributions.
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Incurred research and development cost to develop a patent
: For each of the following items, identify whether they are a Capital Expenditure or an Expense: Built a new elevator in the office building. Acquired a trademark. Incurred research and development cost to develop a patent. Modified a machine, thus ex..
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Offered two different salary arrangements
: You have been offered two different salary arrangements. You can have $149,000 per year for the next two years, or you can have $55,000 per year for the next two years, along with a $35,000 signing bonus today. If the interest rate is 6 percent compo..
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Investors tend to use a higher discount rate to value stocks
: Investors tend to use a higher discount rate to value stocks compared to the discount rate they use to value bonds. Why do you think this is the case? Under what circumstances might an investor use a higher discount rate to value a particular bond co..
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Stock transactioons were completed during the first year
: DeLong Corp was organized on Jan 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no- par common stock with a stated value of $2 per share. The following stock transactioons were completed ..
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Higher interest rate than bond not backed by collateral
: If the risk of repayment on a bond suddenly increases what will happen to the price of the bond today? How would a decrease of inflation expectations affect the price of a bond today? If a bond is backed by collateral (a "secured" bond) would you exp..
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How are the shareholders taxed on the distributions
: On January 1, 2015, Kinney, Inc., an S Corporation, reports $4,000 of accumulated E&P and a balance of $10,000 in AAA. Kinney has two shareholders, Erin and Frank, each of whom owns 500 shares of Kinney’s stock. Kinney distributes $6,000 to each shar..
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Calculate the cash flow from assets-cash flow to creditors
: Use the following information for Ingersoll, Inc., (assume the tax rate is 30 percent): 2013 2014 Sales $ 15,573 $ 15,336 Depreciation 1,741 1,816 Cost of goods sold 4,379 4,787. calculate the cash flow from assets, cash flow to creditors, and cash f..
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