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Steve and Stephanie Pratt purchased a home in Spokane, Washington, for $422,500. They moved into the home on February 1 of year 1. They lived in the home as their primary residence until June 30 of year 5, when they sold the home for $702,500. a. What amount of gain on the sale of the home are the Pratts required to include in taxable income? b. Assume the original facts, except that Steve and Stephanie live in the home until January 1 of year 3, when they purchase a new home and rent out the original home. They finally sell the original home on June 30 of year 5 for $702,500. Ignoring any issues relating to depreciation taken on the home while it is being rented, what amount of realized gain on the sale of the home are the Pratts required to include in taxable income? c. Assume the same facts as in part (b), except that the Pratts live in the home until January of year 4, when they purchase a new home and rent out the first home. What amount of realized gain on the sale of the home will the Pratts include in taxable income if they sell the first home on June 30 of year 5 for $702,500? d. Assume the original facts, except that Stephanie moves in with Steve on March 1 of year 3 and the couple is married on March 1 of year 4. Under state law, the couple jointly owns Steve’s home beginning on the date they are married. On December 1 of year 3, Stephanie sells her home that she lived in before she moved in with Steve. She excludes the entire $30,000 gain on the sale on her individual year 3 tax return. What amount of gain must the couple recognize on the sale in June of year 5?
calculate the firm’s fixed asset turnover ratio.
A series of payments-$10,000 first year $9,000 second year; $8,000 third year; $7,000, fourth year; and $6,000, fifth year-is equivalent to what present amount at 10% interest compounded annually? Solve this problem using the gradient factor, and the..
Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a one-year, 5% note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $834000.
Assume the risk-free rate is 5.4 percent and the expected return on the market is 12.9 percent. What is the company’s cost of equity capital?
You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $450. The loan will have a 9% APR based on end-of-month payments. Erika and Kitty, who are twins, just received $35,000 each for their 26th birthdays..
To estimate the cost of capital, you need to include an estimate of the cost of debt and calculate the weighted average cost of capital for your company.) Estimate the free cash flows to the firm for the future.
Snider Industries sells on terms of 3/10, net 20. Total sales for the year are $934,500. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 36 days after their purchases. What are the days sales out..
What is the income from selling the straddle? What is the profit if the stock price is $36 at expiration?
Why is the office development no longer an attractive investment?
The Dodd-Frank Act created the SEC. Investors can buy corporate bonds on The NYSE.
A firm’s capital structure consists of 25% debt and 75% equity. The yield to maturity on its debt outstanding is 5%. Its tax rate is 40% and its cost of equity is 10%. What is its WACC?
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