Answer:
A)an improvement in the margin of safety for creditors.
Explanation:
Margin of safety can be regarded as a principle of investing whereby an investor only make purchases of securities during the time when the market price is below their intrinsic value significantly. In a case whereby
the market price of a security falls below ones estimation of its intrinsic value significantly, then the difference that exist there is regarded as margin of safety. Margin of safety can as well be regarded as financial ratio which gives measurement of the amount of sales which exceed the break-even point. Most times investors may create a margin of safety with regards to their own risk preferences, purchasing of securities in a time that there is a difference give room for an investment to be made with minimal downside risk.
For instance, company's ratio of liabilities to stockholders' equity decreased from 0.6 to 0.4 during the year.
On its December 31, 2017, balance sheet, Calgary Industries reports equipment of $470,000 and accumulated depreciation of $94,000. During 2018, the company plans to purchase additional equipment costing $100,000 and expects depreciation expense of $40,000. Additionally, it plans to dispose of equipment that originally cost $52,000 and had accumulated depreciation of $7,600. The balances for equipment and accumulated depreciation, respectively, on the December 31, 2018 budgeted balance sheet are:
Answer:
The cost balance on 31 December 2018 is $518,000 while that of accumulated depreciation is $126,400
Explanation:
The balance of fixed assets is computed as
Opening balance - accumulated depreciation - depreciation + Addition - Disposal
Hence given that on December 31, 2017, Calgary Industries reports equipment of $470,000 and accumulated depreciation of $94,000. During 2018, the company plans to purchase additional equipment costing $100,000 and expects depreciation expense of $40,000, Additionally, it plans to dispose of equipment that originally cost $52,000 and had accumulated depreciation of $7,600 the balance then
= $470,000 + $100,000 - $52,000
= $518,000
The accumulated depreciation
= $94,000 + $40,000 - $7,600
= $126,400
Brad operates a hardware store. He maintains the books using the cash method. At the end of the year, his accountant computes his accrual basis income that is used on his tax return. For 2018, Brad had cash receipts of $2,200,000, which included $750,000 collected on accounts receivable from 2017 sales. At the end of 2018, he had $910,000 in accounts receivable from customers, all from 2018 sales. Brad paid cash for all of the purchases. The total amount he paid for merchandise in 2018 was $1,100,000. At the end of 2017, he had merchandise on hand with a cost of $165,000. At the end of 2018, the cost of merchandise on hand was $140,000.
a. Brad's accrual basis gross receipts for 2018 are: __________
b. The cost of goods sold for 2018 under the accrual method is: ____________
c. The gross profit from merchandise sales for 2018 under the accrual basis is:__________
Answer:
Brad Hardware Stores
a. Brad's accrual basis gross receipts for 2018 are: __________
= $1,450,000.
b. The cost of goods sold for 2018 under the accrual method is: ____________
= $1,125,000.
c. The gross profit from merchandise sales for 2018 under the accrual basis is:__________
= $1,235,000.
Explanation:
a) Data and Calculations:
Sales revenue for 2018:
Cash receipts = $2,200,000
Less 2017 accounts receivable $750,000
Add 2018 accounts receivable $910,000
Sales revenue for 2018 = $2,360,000
Gross receipts for 2018:
Cash receipts = $2,200,000
Less 2017 accounts receivable $750,000
Gross cash receipts = $1,450,000
Purchases for 2018 = $1,100,000
Beginning inventory = $165,000
Ending inventory = $140,000
Cost of goods sold = $1,125,000
Accrual Basis:
Sales revenue for 2018 = $2,360,000
Cost of goods sold = 1,125,000
Gross profit $1,235,000
Sales totaled $1,277,750 for the year, variable selling and administrative expenses totaled $158,710, and fixed selling and administrative expenses totaled $212,190. There was no beginning inventory. Assume that direct labor is a variable cost. Under variable costing, the company's net operating income for the year would be:
Complete Question:
Krepps Corporation produces a single product. Last year, Krepps manufactured 32,150 units and sold 26,900 units. Production costs for the year were as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $234, 695 $154, 320 $279, 705 $482, 250 Sales totaled $1,277,750 for the year, variable selling and administrative expenses totaled $158,710, and fixed selling and administrative expenses totaled $212.190. There was no beginning inventory. Assume that direct labor is a variable cost. Under variable costing, the company's net operating income for the year would be:
Multiple Choice
O $28,350 higher than under absorption costing.
0 $28,350 lower than under absorption costing.
0 $78,750 lower than under absorption costing,
0 $78,750 higher than under absorption costing.
Answer:
Krepps Corporation
Under variable costing, the company's net operating income for the year would be:
0 $78,750 lower than under absorption costing
Explanation:
a) Data and Calculations:
Production units = 32,150 units
Sales units = 26,900 units
Production costs :
Direct materials $234, 695
Direct labor $154, 320
Variable manufacturing overhead $279, 705
Fixed manufacturing overhead $482, 250
Sales for the year $1,277,750
Variable selling and administrative expenses $158,710
Fixed selling and administrative expenses $212,190
Income Statement under variable costing:
Sales for the year $1,277,750
Variable cost of goods sold $559,520
Variable selling and administrative expenses $158,710
Total variable costs $718,230
Contribution margin $559,520
Fixed manufacturing overhead $482,250
Fixed selling and administrative expenses $212,190
Total fixed costs $694,440
Net operating loss $134,920
Direct materials $234, 695
Direct labor $154, 320
Variable manufacturing overhead $279, 705
Total variable manufacturing cost $668,720
Production units = 32,150
Unit costs = $20.60
Cost of goods sold = $559,520 ($20.80 * 26,900)
Income Statement under absorption costing:
Sales for the year $1,277,750
Cost of goods sold $963,020
Gross profit $314,730
Fixed selling and administrative expenses $212,190
Variable selling and administrative expenses $158,710
Total fixed costs $370,900
Net operating loss $56,170
Direct materials $234, 695
Direct labor $154, 320
Variable manufacturing overhead $279, 705
Fixed manufacturing overhead $482, 250
Total manufacturing costs $1,150,970
Production units = 32,150
Cost per unit = $35.80
Cost of goods sold = $963,020 ($35.80 * 26,900)
Difference = $78,750 ($134,920 - $56,170)
A manager spent 5 hours of his day in meetings. If he said that he spent 70% of his day, how many total hours did he work?
Answer:
The total hours the manager worked
= 7.14 hours
Explanation:
a) Data and Calculations:
Time spent by a manager in meetings per day = 5 hours
Percentage of time spent in meetings = 70%
Total hours the manager worked per day = 5/70% = 7.14 hours
b) The total hours that the manager worked per day = 7.14 hours or 7 hours 9 minutes (approximately). This is obtained by dividing the hours spent in meetings by the equivalent proportion that meetings consumed per day.
Describe the events that occur in an efficient market in response to new information that causes the expected return to exceed the required return. What happens to the market value
Answer:
The efficient market hypothesis tells, in an equilibrium, the price of stocks or security is an unbiased estimate of the true values.
Explanation:
Thus, in the equilibrium, of security prices are neither an overvalued nor are undervalued. Suppose the investors learn new information about the company that suggests there stock is worth more than the current price. The security gets undervalued expected return exceeds the required return. Increased in demand for security from the investors with this new information will thus bid up the market value plus reduce its expected return until they are equal.Precision Corporation used a predetermined overhead rate last year of $3 per direct labor-hour, based on an estimate of 24,000 direct labor-hours to be worked during the year. Actual costs and activity during the year were: Actual manufacturing overhead cost incurred $84,000 Actual direct labor-hours worked 27,000 The overapplied or underapplied manufacturing overhead for the year was:
Answer:
$12,000 Overhead Underapplied
Explanation:
Calculation to determine what The overapplied or underapplied manufacturing overhead for the year was:
Total pre-determined manufacturing overhead $72,000
($3*24,000)
Less Actual manufacturing overhead cost incurred ($84,000)
Overhead Underapplied $12,000
Therefore The overapplied or underapplied manufacturing overhead for the year was:$12,000 Overhead Underapplied
Chance, Inc. sold 5,000 units of its product at a price of $172 per unit. Total variable cost per unit is $131, consisting of $92 in variable production cost and $39 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.
Answer:
$400,000
Explanation:
Computation for the manufacturing margin for the company under variable costing
Using this formula
Manufacturing margin= Sales - Total variable production cost
Let plug in the formula
Manufacturing margin=( 5,000*$172)- (5,000*$92)
Manufacturing margin=$860,000-$460,000
Manufacturing margin= $400,000
Therefore the manufacturing margin for the company under variable costing is $400,000
g. provides the following information for 20X8: Net income $260,000 Market price per share of common stock $60 per share Dividends paid $200,000 Common stock outstanding at Jan. 1, 2018 150,000 shares Common stock outstanding at Dec. 31, 2018 230,000 shares The company has no preferred stock outstanding. Calculate the price/earnings ratio of common stock.
Answer:
53.09
Explanation:
The price/earnings ratio of common stock is an investment ratio that compares the current price of the stock to its earnings per share, in a bid to assess the stock performance relative to its earnings
share price=$60
earnings per share=net income/year-end shares outstanding
net income=$260,000
year-end outstanding shares=230,000
earnings per share=$260,000/230,000
earnings per share=$1.13
price/earningsratio=$60/$1.13
price/earningsratio=53.09
Green Corporation reported pretax book income of $1,040,000. During the current year, the net reserve for warranties increased by $52,000. In addition, tax depreciation exceeded book depreciation by $110,000. Finally, Green subtracted a dividends received deduction of $26,000 in computing its current-year taxable income. Green's cash tax rate is
Answer:
19.30%
Explanation:
Calculation to determine what Green's cash tax rate is
First step is to calculate the Taxes payable using this formula
Taxes payable = (Pretax book income + provision for warranties - depreciation in excess of books - dividends received deduction) x 21%
Let plug in the formula
Taxes payable= ($1,040,000 + $52,000 - $110,000 - $26,000) x 21%
Taxes payable=$956,000×21%
Taxes payable= $200,760
Now let determine the Cash tax rate using this formula
Cash tax rate = Taxes payable / Pretax book income
Let Plug in the formula
Cash tax rate = $200,760 / $1,040,000
Cash tax rate = .1930
Cash tax rate=19.30%
Therefore Green's cash tax rate is 19.30%
What is the loan amount if the interest rate is 7.5% per year and the monthly interest payment is $1,250?
Answer:
The amount of the loan was $ 13,953.48.
Explanation:
To determine what is the loan amount if the interest rate is 7.5% per year and the monthly interest payment is $ 1,250, the following calculation must be performed:
1250 x 12 = 15,000
1,075X = 15,000
X = 15,000 / 1,075
X = 13,953.48
Therefore, the amount of the loan was $ 13,953.48.
A physical count of merchandise inventory on July 30 reveals that there are 180 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for July is
Answer: $3,708
Explanation:
Using FIFO means that the earlier goods are sold before the later ones so the closing inventory would have the latest goods purchased.
If there are 180 units on hand, the cost would be:
54 units purchased at $22(180 - 54) units purchased at $20Closing inventory is:
= (54 * 22) + ( (180 - 54) * 20)
= (54 * 22) + ( 126 * 20)
= $3,708
3. Prime Cuts was the brainchild of Cairn Terrier who guided all the marketing efforts of the product. She selected each element of the marketing mix such as the package, brand name, pricing, promotion, and placement decisions. Karen obviously serves in the job of:
Question Completion with Options:
A) marketing consultant.
B) brand manager.
C) operations analyst.
D) marketing intermediary
Answer:
Prime Cuts
Karen obviously serves in the job of:
A) marketing consultant.
Explanation:
Brand managers ensure that the image perceived by customers of Prime Cuts remains recognizable, up to date, and exciting. Brand managers promote and change the public perception of a brand's image. They ensure that the company's branding is consistent across advertising and other brand campaigns. A marketing consultant or manager ensures that prospective customers are reached with Prime Cuts in order to present them with the goods and to increase sales. She works to achieve effective marketing mix.
Mussatto Corporation produces snowboards. The following per unit cost information is available: direct materials $17, direct labor $6, variable manufacturing overhead $3, fixed manufacturing overhead $19, variable selling and administrative expenses $1, and fixed selling and administrative expenses $13. Using a 30% markup percentage on total per unit cost, compute the target selling price. (Round answer to 2 decimal places, e.g. 10.50.)
Answer:
the target selling price is $76.70
Explanation:
The computation of the target selling price is shown below:
= Total cost + 1 × markup percentage
= ($17 + $6 + $3 + $19 + $1 + $13) × (1.30)
= $76.70
hence, the target selling price is $76.70
We simply applied the above formula so that the target selling price could be determined
trình bày các vai trò của đạo đức kinh doanh trong phát triển doanh nghiệp
Answer:
Explanation:
Trung thực: Tính trung thực trong đạo đức kinh doanh thể hiện ở chỗ không buôn bán, sản xuất những mặt hàng nhà nước cấm, không dùng các chiêu trò dối trá để đạt được lợi ích của mình, không trốn thuế, làm ăn phi pháp; không tham ô, hối lộ; trung thành chấp hành đúng quy định của pháp luật…
Tôn trọng con người: Tôn trọng con người bao gồm tôn trọng nhân viên, đối tác khách hàng, đối thủ cũng như tất cả những người làm việc cùng với mình
Đạo đức kinh doanh gắn liền lợi ích của công ty doanh nghiệp với lợi ích chung của khách hàng và trách nhiệm đối với xã hội
Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $27,000 to $54,000 per year. The new machine will cost $82,500, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period; so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm's WACC is 12%. The old machine has been fully depreciated and has no salvage value.
Required:
Should the old riveting machine be replaced by the new one?
Solution :
Calculating the (NPV) Net Present value for the following matters to check the feasibility of the replacement of an 8 year old riveting machine with the new one :
Let
A = Year (n)
B = Initial outlay
C = Five-year MACRS depreciation percentage
D = Depreciation with MACRS Method (D)
E = Savings in earnings before depreciation
F = Taxable Income (earnings before depreciation - depreciation
G = Income taxes (Taxable Income *40%)
H = [tex]\text{After-Tax Net}[/tex] cash flow [tex]\text{(Taxable income - taxes + depreciation)}[/tex]
I = PV of [tex]\text{Net cash flow}[/tex] at the rate [tex]12\%[/tex]= [tex]NCF[/tex]/ [tex](1+WACC\%)^n[/tex]
A B C D E F G H I
0 82,500 -82,500 -82,500
1 20% 16500 27000 10500 4200 22800 20357.14
2 32% 26400 27000 600 240 26760 21332.91
3 19% 15675 27000 11325 4530 22470 15993.70
4 12% 9900 27000 17100 6840 20160 12812.04
5 11% 9075 27000 17925 7170 19830 11252.07
6 6% 4950 27000 22050 8820 18180 9210.55
7 0% 0 27000 27000 10800 16200 7328.06
8 0% 0 27000 27000 10800 16200 6542.91
NPV $22,329.39
As the NPV, the project is positive ($22,329.39) and so the company should replace the 8 year old riveting machine with the new one.
The following transactions took place in Boeing Business.
01.03.2021 - Purchase of goods costing Rs. 150000 from Airbus
company on credit.
05.03.2021 - Return of goods costing Rs. 30000 to Airbus
20.03.2021 - Sale of goods costing Rs. 100000 for Rs. 160000 on
credit
29.03.2021 - Payment of sales commission of Rs. 10000
02.04.2021 – Settlement of the full amount due to Airbus
What is the accounting equation which shows the net impact of the
above transactions in Boeing business as at 31.03.2021?
Assets
Liabilities
+
Equity
Answer:
1) Dr: Goods/Inventory (Asset increase) 150000
Cr: Payable (Liability increase) 150000
2) Dr: Payable (Liability decrease) 30000
Cr: Goods (Asset decrease) 30000
3) Dr: Payable (Liability decrease) 30000
Cr: Goods (Asset decrease) 30000
4) Dr: Receivables (Asset increase) 160000
Cr: Goods (Asset Decrease) 100000
Cr: Profit and loss (Equity increase) 60000
5) Dr: Commission Expense (Equity decrease) 10000
Cr: Cash (Asset Decrease) 10000
6) Dr: Payable (Liability decrease) 120000
Cr: Cash (Asset Decrease) 120000
If money is your political voice, how loud is your voice? Who has the loudest voice?
Answer:
i....I honestly don't know I've tried online but it shows nothing sorry
Blazing Woman, a large music festival wants to secure a venue for its show coming up in two years. 19 months before the festival it enters into an agreement with Stonestock Farms. They shake hands on it, but do not write or sign any type of formal agreement. Eight months later Stonestock notified Blazing Woman that they decided against allowing their farm to be used. Can Blazing Woman enforce the agreement with the Stonestock even though it was not in writing
Answer:
No. Because the contract cannot be fully performed within a year of its creation, R is within the statute of frauds.
Explanation:
Since in the question it is mentioned that there is no written agreement so the agreement should not be enforceable as as per the law if the contract is to be treated as completed for a period of time so it should be in the written form
Here woman could not able to sue the stonstock farms
Therefore the above statement represent an answer
Luthan Company uses a plantwide predetermined overhead rate of $23.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $286,800 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $266,000 and 11,100 total direct labor-hours during the period.
Required:
Determine the amount of manufacturing overhead that would have been applied to units of product during the period.
Answer:
Allocated MOH= $262,900
Explanation:
Giving the following information:
Plantwide predetermined overhead rate= $23.90 per direct labor hour.
The company incurred actual 11,100 total direct labor hours during the period.
To allocate overhead costs, we need to use the following formula:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 11,000*23.9
Allocated MOH= $262,900
A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest __________________ account and ___________________ the Interest ___________________ account.
Answer:
The required adjusting entry would be to debit the Interest expense account and credit the Interest payable account.
Explanation:
The number of days that a loan debt stays unpaid is referred to as the outstanding number of days.
In line with the general accounting rules, all expenses must be debited. Therefore, the interest expense has to be debited.
Interest payable, however, is the amount owed to a lender by a firm and is thus credited as the matching journal entry to the interest expense.
Therefore, we have:
The required adjusting entry would be to debit the Interest expense account and credit the Interest payable account.
....................................................
Answer:
....................................................:)))
Botosan Factory has budgeted factory overhead for the year at $468,602, and budgeted direct labor hours for the year are 280,600. If the actual direct labor hours for the month of May are 255,300, the overhead allocated for May is
Answer:
$426,351
Explanation:
Calculation to determine what the overhead allocated for May is
Using this formula
Overhead allocated for May=(Estimated overhead/Estimated total DLHs)*Overhead rate per DLHs
Let plug in the formula
Overhead allocated for May=($468,602/ 280,600)*255,300
Overhead allocated for May=$1.67*255,300
Overhead allocated for May=$426,351
Therefore the overhead allocated for May is $426,351
The process of acquiring political beliefs is called political socialization.
true or false
Allie, a human resource manager at an electronics firm, observes that many employees who are reaching the traditional retirement age are not interested in leaving the organization. Which statement best explains the reason for this trend among older employees?
A) There are laws against gender discrimination.
B) There is a rise in the availability of pensions.
C) Jobs are becoming less physically demanding.
D) Phased-retirement programs require employees to work longer hours.
E) Older workers generally don't have much debt.
Answer:
C) Jobs are becoming less physically demanding.
Explanation:
Since in the question it is mentioned that at the time when the employee reaches to the retirement age so they are not interested in leaving the organization as they dont want to search for a new job also they are happy with the current job. In addition to this, jobs are very less physical demanding because of their ages
Therefore the option c is correct
Năm trước, doanh thu đạt được 1 triệu $, trong đó 250.000 là doanh thu bán chịu; số dư khoản phải thu khách hàng trung bình là 41.096$. Năm nay, công ty kỳ vọng doanh thu sẽ tăng thêm 50%, tỷ lệ doanh thu bán chịu/doanh thu không đổi, kỳ thu tiền bình quân tăng 50% (giả sử một năm có 365 ngày). Nếu khoản phải thu tăng thêm được tài trợ từ bên ngoài (chẳng hạn như vay ngân hàng) thì công ty cần thêm nguồn tài trợ này là bao nhiêu?
punda mavana Umbi. posddajh jzushl Unni Sunni nayye mayiru
The members of a wedding party have approached Imperial Jewelers about buying 14 of these gold bracelets for the discounted price of $363.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $8. Imperial Jewelers would also have to buy a special tool for $461 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $12.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding partyâs order using its existing manufacturing capacity.
Required:
a. What is the financial advantage (disadvantage) of accepting the special order from the wedding party?
b. Should the company accept the special order?
answers:
the financial advantage = 4,341 dollars
given that there is an advantage, then the project has to be accepted.
Explanation:
total incremental revenue from the 14 bracelets = 14 x 363 = $5082
direct material = 8 x 14 = 112
overhead = 12 x 14 = 168
we have the additional expense for this tool to be 461 dollars
for the special filigree that is to be attached to this bracelet e have
112 + 168 + 461 = $741
a. the financial advantage of accepting this = 5082 - 741 = 4341 dollars
b. given that there is a financial advantage then it is better that this order is accepted.
The parts can be purchased from an outside supplier for only $28 each. The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth. If the parts are purchased from the outside supplier, the annual impact on the company's operating income will be:________
a) $24,000 increase
b) $24,000 decrease
c) $56,000 increase
d) $56,000 decrease
Answer:
d) $56,000 decrease
Explanation:
In the case when parts are produced by sharp corporation
Given that
Total cost per unit = $36
Total cost = Total cost per unit × parts
= $36 × 8,000
= $288,000
Now
If the parts are Purchased by the outside supplier, fixed costs decreased by one-fourth.
So, three-fourth fixed costs should be incurred.
Now
Total cost per unit = Purchase Price + three - fourth fixed costs
= $28 + (3 ÷4) × $20
= $28 + $15
= $43
Now
Total cost = $43 × 8,000
= $344,000
So, the operating income is
= $288,000 - $344,000
= $56,000 decrease
A production process has six subsequent stages, each with their own specific resources and performing crucial tasks. Four of these stages have a capacity of 20 units per hour, while the other two stages have a capacity of 10 units per hour. What is the best conclusion?
Answer: Both stages with a capacity of 10 units per hour can be considered bottlenecks.
Explanation:
From the information given in the question, the best conclusion is that both stages with a capacity of 10 units per hour can be considered the bottlenecks.
It should be noted that the bottleneck in the chain of processes, is the one that has the limited capacity and this then reduces the capacity of the whole chain and slows down production.
Fiat announces its intention to build an all-electric car plant in Belvidere, Illinois. Fiat also announces it intends to sell one million vehicles per year. It hires 3000 additional workers - enough to keep the plant operating at full capacity. Fiat also signs contracts with its unions committing to pay all of its workers at this plant for 2 full years whether or not the production at the plant reaches capacity. Is this a strong strategic commitment by Fiat?
Answer:
Yes, this is Fiat's strong strategic commitment, as a company's strategy corresponds to the set of actions that a company plans to achieve its long-term goals and objectives.
When the company then announces to stakeholders its intention to build an electric car plant in Illinois, as well as its plans to sell one million vehicles a year, hire 3,000 additional workers, and sign workers' pay contracts for 2 full years, it is assuming to its target audience a commitment to comply with their declarations, which means that the new investments and launching of new products will impact the company as a whole, its profitability, market value and competitiveness, which can then be understood. as a strong strategic commitment by Fiat.
Suppose that the tax on interest income is levied on the nominal interest rate, the tax rate is 20 percent, and the real interest rate is 4 percent a year. There is no inflation.
Calculate the after-tax real interest rate and the true tax rate on interest income.
Answer:
After-tax interest rate ⇒ 3.2%True tax on interest income ⇒ 20%Explanation:
After-tax real interest rate:
= Real interest rate * (1 - tax rate)
= 4% * (1 - 20%)
= 4% * 80%
= 3.2%
True tax on interest income:
= 20%
True tax on interest income is the tax rate levied on the nominal interest rate which is 20%.
