Question: If the before tax rate of return on a riskless
If the before tax rate of return on a riskless fully taxable bond is 7% and the before tax rate of return on a riskless tax favored asset is 5%, what is the implicit tax rate on the tax favored asset? If a tax exempt riskless asset earns a before tax rate of return of 4%, what is the explicit tax rate for the marginal investor on the riskless tax favored asset that returns 5%?
Answer to relevant QuestionsCalculate the implicit and explicit tax rates for the following three assets. The required pretax total rate of return Ro for each asset is 20% for both the fully taxable asset and the partially taxable asset and 8% for the ...Suppose that insurance policies were fully tax exempt but (a) policies pay less than the fully taxable bond return to cover the costs of the insurance company and (b) loans can be secured only at a higher rate than the fully ...Assume you work for a local municipality. Under what conditions is it tax advantageous for municipalities to undertake profit making ventures? Why don’t we see more municipality operated activities? Can you think of some ...Below is an extract from Cisco Systems’ 2012 Annual Report. What is the firm’s GAAP effective tax rate? Why does it differ from the top statutory tax rate? What are deferred taxes? What are the major deferred tax items ...Suppose the tax rate is 30% if taxable income is positive and 0% if taxable income is negative. Calculate the expected tax payable for the following four projects. For each project the expected taxable income is $ 50,000. ...
Post your question