What are the real after-tax costs of funds to the business

Assignment Help Econometrics

Reference no: EM131130899

Taxes, Inflation, and Interest Rates. If a business borrows funds at 10 percent per year, the business has a 40 percent tax rate, and the annual inflation rate is 5 percent, what are the real after-tax costs of funds to the business? Similarly, if an investor receives a nominal return of 8 percent on a savings deposit, the tax rate is 30 percent, and the inflation rate is 6 percent, what is the after-tax rate of return.

Reference no: EM131130899

Questions Cloud

Discuss the issue of social dumping in terms of the eu : Dowling et al (p. 252) briefly discuss the issue of social 'dumping' in terms of the EU. How can this be considered comparable to the issue of outsourcing in the US? What suggestions do you have for these types of challenges?

Do you believe supreme court members should be term limited : Do you believe Supreme Court members should be term-limited?- Review and utilize the web pages at Find Law and Legal Affairs to make your argument.

Explain why the stochastic process : Let {N1(t),t ≥ 0} and {N2(t),t ≥ 0} be two independent Poisson processes, with rates λ1 and λ2, respectively. We defineN(t) = N1(t) - N2(t). (a) Explain why the stochastic process {N(t) t ≥ 0} is not a Poisson process.

Using expectations theory-forecast the yields on securities : The yield on 1-year Treasury securities is 6%, 2-year securities yield 6.2%, and 3-year securities yield 6.3%, and 4-year securities yield 6.5%.There is no maturity risk premium. Using expectations theory, forecast the yields on the following securit..

What are the real after-tax costs of funds to the business : what are the real after-tax costs of funds to the business? Similarly, if an investor receives a nominal return of 8 percent on a savings deposit, the tax rate is 30 percent, and the inflation rate is 6 percent, what is the after-tax rate of retur..

Explain the term zero sum game in derivative transaction : Explain the term 'zero sum game' in a derivative transaction. Discuss the main difference between Treynor's position of investment risk measurement and that of Sharpe and use your answer to deduce the equation of the CAPM in each.

Describe your role and responsibility as logistic manager : Describe your role and responsibility as the Logistic Manager - The power outage has affected four counties in Northern Indiana, and three counties in Illinois, including Cook County.

The moment-generating function of the random variable : (a) Obtain the moment-generating function of the random variable N{t + S). Indication. If X has a Poisson distribution with parameter a, then Mx(t) = exp{α(et - 1)}.

What is the yield to maturity at current market price : The Brownstone Corporation's bonds have 4 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. What is the yield to maturity at a current market price of $887? What is the yie..

User Account

All Pages