What is the total tax, Taxation

Assignment Help:

Melissa Tang has recently sold her stake in Global Manufacturing Ltd., a firm that she founded in 1990, for $15 million. She is now trying to decide how best to invest the proceeds to support her during her retirement. Following a preliminary conversation with her investment advisor, she is considering investing them in a portfolio consisting of one-year Government of Canada treasury bills, the bonds of Gardner Company, and the shares of Anderson Inc. Recognizing that taxes will represent a significant expense, she is interested in how they might differ between the two different types of investments, debt and equity. To this end, she has asked you to determine the taxes that she might reasonably expect to pay on the two investments recommended by the advisor.

As a first step, you have determined that Melissa's marginal federal tax rate is 29% and her marginal provincial tax rate is 17%. You have also determined that the gross up on eligible dividends is 41%, the dividend tax credit is 16.44% of the grossed-up amount, and the provincial tax rate on eligible dividends is 11.5% of the actual dividend.

a. The shares of Anderson Inc. are currently selling for $2.50 and paid a dividend of $0.20 per share last year. The investment advisor has informed Melissa that these dividends should increase by 5% this year and that the shares should be trading at a price of $3.00 in one year's time. Assuming that the investment advisor's beliefs turn out to be true, what is the total tax that Melissa will have to pay if she invests $2,500 in the shares of Anderson today and sells them in one year's time?

b. The bonds of Gardner Company are currently priced to yield 8%, carry a coupon rate of 6% payable semi-annually, and have 10 years remaining until maturity. Based on anticipated changes in interest rates, the advisor believes that the bonds will be selling for $95 in one year's time. Assuming that the investment advisor's beliefs turn out to be true, what is the total tax that Melissa will have to pay if she purchases 25 $100 face value bonds of Gardner Company today and sells them in one year's time?

c. If Melissa decides to invest $4 million in one-year treasury bills that offer a 3% yield, $5 million in the bonds of Gardner Company and $6 million in the shares of Anderson Inc., what is the expected after-tax rate of return on her selected investment portfolio?


Related Discussions:- What is the total tax

Vat, meaning of vat

meaning of vat

Advanced tax, The Madison Restaurant was formed a S corporation at the end ...

The Madison Restaurant was formed a S corporation at the end of last year. Bob Buron, owns 60% of the stock, manages the restaurant. Ray Huges owns the remaining 40%

Tax haven, T ax Haven A country with tax-preference laws for fo...

T ax Haven A country with tax-preference laws for foreign organization and individuals. 3 classes of jurisdictions are provided to as tax havens those are (1) levy taxe

C program to input salary and output payable tax, c program to input the sa...

c program to input the salary and output payable tax using the following information salary tax 10,000-20,000 2% 20,000-35,000 4% 3

What is the tax savings from the special tax treatment?, If Daniel's margin...

If Daniel's marginal tax rate is 35 percent and he has $115,200 of other capital gains (taxed at 15 percent), what is the tax savings from the special tax treatment? Daniel is c

Prepare a state tax return, David builds and maintains web applications for...

David builds and maintains web applications for a number of clients. He does a majority of his work from his home office, but he frequently drives to the client site to meet with h

Explain the effects of taxation on the equilibrium of a firm, Q. Explain th...

Q. Explain the effects of taxation on the equilibrium of a firm? Suppose a tax is imposed on the producers of a commodity, the tax is on each unit for they produce. Naturally,

Explain expatriation tax, An expatriation tax is a tax on somebody who give...

An expatriation tax is a tax on somebody who gives up their citizenship. In United States, the expatriation tax provisions under Section 877 and Section 877A of the Internal Revenu

RESIDENCE ND SOURCE, FOR THE RELEVANT INCOME YEAR, EILL STANNOS BE REGARDED...

FOR THE RELEVANT INCOME YEAR, EILL STANNOS BE REGARDED AS A RESIDENT OR NON- RESIDENT

., Alan is an employee at ABC Pty Ltd (ABC). He has negotiated the followin...

Alan is an employee at ABC Pty Ltd (ABC). He has negotiated the following remuneration package with ABC: • salary of $300,000; • Payment of Alan''s mobile phone bill ($220 per mont

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd