HW1

March 14th March 21st Ask: 30.24 Ask: 30.42 Bid: 30.21 Bid: 30.39 Suppose you purchase 787 shares of ABC stock on March 14th and then sell them one week later on March 21st. What are your net proceeds?

=118.05 You buy at the asking price and sell to the biding price. You bought at $30.24 on March 14th and you sold at $30.39 on March 21st. You made a profit of ($30.39 - $30.24=) $0.15 per share.

You have decided to form a new start-up company developing applications for the iPhone. Match each example listed below with the type of decision you would make as a Chief Financial Offer. A)Determining which types of iPhone application projects will offer your company the best value and therefore which project your company should develop. B)Determining how to fund your iPhone application investments what what mix of bonds and stocks will sell. C)Ensuring that your company has the necessary funds to make investments, pay interest on loans, and pay your employees

A) Investment decision B) Financing decision C) Cash mgmt decision

You are a shareholder in a C corporation. The corporation earns $9 per share before taxes. Once it has paid taxes, it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 40%, and the personal tax rate on dividend income is 39%. How much is left for you after all taxes are paid? The amount that remains is $ ____ per share. (Round to 2 decimals.)

After-tax earnings = $9 × (1-40%) × (1-39%) =$3.294. The correct answer is: 3.29

Shareholders of a corporation can exercise control by all of the following except: A. electing a board of directors. B. Voting on shareholder proposals. C. selling their shares D. electing the chief executive officer.

D. electing the chief executive officer.

You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5,000. You plan to put down $2,000 and borrow $3,000. You will need to make annual payments of $1,100 at the end of each year. Show the timeline of the loan from your perspective.

Hint: from your perspective on the loan, you received $3,000 today and you will make 5 installments of $1,100 at the end of each of the next five years. Year 0 1 2 3 4 5 ------------------|-------------|-------------|-------------|-------------|------------| Cash Flow $3000 -$1100 -$1100 -$1100 -$1100 -$1100

You are a shareholder in an S corporation. The corporation earns $2 per share before taxes. Once it has paid any applicable taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 50%, and the personal tax rate on income is 35%. How much is left for you after all taxes are paid? The amount that remain is $ ____ per share. (Round to two decimal places.)

S corporations are only subject to income tax. After-tax income = $2 × (1 - 35%) = $1.3. The correct answer is: 1.30