[removed]E. e. $800,000

Ryngaert & Sons, Inc. has operating income (EBIT) of $2,500,000. The company’s depreciation expense is $450,000, its interest expense is $120,000, and it faces a 40 percent tax rate. What is the company’s net income?

A firm purchases $10 million of corporate bonds that paid a 16 percent interest rate, or $1.6 million in interest. If the firm’s marginal tax rate is 40 percent, what is the after-tax interest yield?

A firm invests in the common stock of another company having a 16 percent before-tax dividend yield. If the firm’s marginal tax rate is 40 percent what is the after-tax dividend yield?

The Carter Company’s taxable income and income tax payments are shown below for 2003 through 2006:

Assume that Carter’s tax rate for all 4 years was a flat 15 percent; that is, each dollar of taxable income was taxed at 15 percent. In 2007, Carter incurred a loss of $19,000. Using corporate loss carry-back, what is Carter’s adjusted tax payment for 2006?

A firm can undertake a new project that will generate a before-tax return of 20 percent or it can invest the same funds in the preferred stock of another company that yields 13 percent before taxes. If the only consideration is which alternative provides the highest relevant (after-tax) return and the applicable tax rate is 40 percent, should the firm invest in the project or the preferred stock?

Cooley Corporation has $20,000 that it plans to invest in marketable securities. It is choosing between MCI bonds which yield 10 percent, state of Colorado municipal bonds which yield 7 percent, and MCI preferred stock with a dividend yield of 8 percent. Cooley’s corporate tax rate is 40 percent, and 70 percent of its dividends received are tax exempt. What is the after-tax rate of return on the highest yielding security?

GPD Corporation has operating income (EBIT) of $300,000, total assets of $1,500,000, and its capital structure consists of 40 percent debt and 60 percent equity. Total assets were equal to total operating capital. The firm’s after-tax cost of capital is 11 percent and its tax rate is 40 percent. The firm has 50,000 shares of common stock currently outstanding and the current price of a share of stock is $30.00. What is the firm’s Market Value Added (MVA)?

GPD Corporation has operating income (EBIT) of $300,000, total assets of $1,500,000, and its capital structure consists of 40 percent debt and 60 percent equity. Total assets were equal to total operating capital. The firm’s after-tax cost of capital is 11 percent and its tax rate is 40 percent. The firm has 50,000 shares of common stock currently outstanding and the current price of a share of stock is $30.00. What is the firm’s Economic Value Added (EVA)?

An individual with substantial personal wealth and income is considering the possibility of opening a new business. The business will have a relatively high degree of risk, and losses may be incurred for the first several years. Which legal form of business organization would probably be best?

Which of the following statements is correct?