Question: Refer to Problem 12-33. To help pay for the pickup truck the Ogi Corp. obtained a $10,000 loan from the truck dealer, payable in four

Refer to Problem 12-33. To help pay for the pickup truck the Ogi Corp. obtained a $10,000 loan from the truck dealer, payable in four end-of-year payments of $2500 plus 10% interest on the loan balance each year.

(a) Compute the after-tax rate of return for the truck together with the loan. Note that the interest on the loan is tax deductible, but the $2500 principal payments are not.

(b) Why is the after-tax rate of return computed in part (a) so much different from the 12.5% obtained in Problem 12-33?

Step by Step Solution

★★★★★

3.41 Rating (173 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Year Principal pymt Rem Balance Interest 1 2500 7500 1000 2 2500 5000 750 3 2500 2500 500 4 2500 0 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

7-B-E-M (383).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

The Ogi Corporation, a construction company, purchased a pickup truck for $14,000 and used MACRS depreciation in the income tax return. During the time the company had the truck, they estimated that...

A pickup truck has a clean drag-area CDA of 35 ft2. Estimate the horsepower required to drive the truck at 55 mi/h (a) clean and (b) with the 3- by 6-ft sign in Fig. P7.88 installed if the rolling...

Four $10 000 bonds bearing interest at 6% payable quarterly and redeemable at par on September 1, 2024, were purchased on January 23, 2012, to yield 5% compounded quarterly. Determine (a) The premium...

Need ONLY an answer to Part C, step 1, questions 1 and 3. Term Project Part A: Understanding Financial Statements Locate and use an annual report STEP 1: The Company Assigned to you Find the most...

Need a sample answer for part C. Looking for a tutor to answer this question for the tutor credits I have. Would be a great help if someone would work with this price. Thanks a lot, really appreciate...

Argonaut has to account for the acquisition of 100% of the shares of Moe's Lawn Care Limited (MLC) in Argonaut's June 30, 20X9, financial statements, even though MLC's numbers might be subject to...

Needing ANSWERS ASAP! Starting at pg 34 - Labeled Graded Project 06155200: Graded Project Instructions & Worksheets 1 Lesson 1: Business, Accounting, and You PROJECT GOAL The goal of this graded...

I need help answering 7 questions on this prep test - can someone help? Moores Familay Restaurant Financial Data Income & Expense Statement Sales Cost of Product Labor Benefits Utilities Loan...

The management of Spring Meadow Dairy Company, described in Problem 11-1A, now plans to use the multiple production department factory overhead rate method. The total factory overhead associated with...

Suppose the above graph represents the Russian economy. What are the gains from trade for Russia? a. $225 O b. $67.5 c. None of these d. $400 e. $55

Solve the linear inequality. Express the solution using interval notation. ( 4 ) / ( 3 ) - ( 1 ) / ( 2 ) x > = ( 7 ) / ( 6 ) + x

What mass of CO2 could be formed by the reaction of 16 g CH4with 48 g of02? CH4 + 202 CO2 + 2H20 1) 44 g 2 2) 33 g 3) 16 g 4) 24 g

Consider an un-pipelined processor takes 4 clock cycles for ALU and other operations but it takes 5 clock cycles for memory operations. Assume the relative operation frequencies like ALU and other...

Inglese La traccia : "I poveri della societ dovrebbero lavorare di pi per diventare ricchi". Scrivi un discorso alla dichiarazione esplorando le ragioni per essere d\'accordo / in disaccordo. 200...

A sample of copper sulphate pentahydrate contains 3.782 g of Cu. How many grams of oxygen are in the sample? 1) 0.952 g 1 2) 3.809 g 3) 4.761 g 4) 8.576 g

0.6 and wn = 5rad/sec, Consider the system shown below, where 5 = obtain the rise time tr, peak time t,, maximum overshoot M, and setting time ts. The system is subjected to the step input. R(s) E(s)...

Refer to problem 1. What is the total amount of interest paid over the life of the loan? Data From Problem 1 Compute the required monthly payment on a $160,000, 25-year fixed-rate mortgage with a...

How does managements explanation enhance the usefulness of financial accounting information?

What are several examples of internal, management-prepared information that ordinarily would not be communicated externally?

What are some examples of internal users of accounting information?

Serial Problem Business Solutions LO P1, P2, P3, P4, P5 After the success of the company's first two months, Santana Rey continues to operate Business Solutions. The November 30, 2017 unadjusted...

solve part b only Question 3: (Total 10 marks) Use the information presented below to answer the questions: A. Record the following transactions in the Enterprise Fund of the country: (1*5: 5Marks)...

Tony's favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a...