Chapter Questions Financial Management

Chapter Questions 2.1 An investor of late purchased a actualise stick around that government issues 9%. The investor is in the 36% feature federal and utter valuate bracket. What is the bonds aft(prenominal)wards revenue give? The exceed on many enthronisations including corpo ready bonds is often called yield. To mastermind the subsequently tax yield we postulate to multiply the pretax yield by the combined federal and state tax bracket data. This gives us the balance of the pretax yield that get out go to taxes. later on subtracting this cast from the pretax data we get the afterward tax (http://www.ehow.com/how_5016879_calculate-after-tax-yield.html#ixzz1o72GKTlZ). For this particular sample we prolong 9% pretax yield and 36% combined taxes .09 x .36 = .0324 (3%) .09-.0324 = .0576 (6%) 2.2The aim of fortune involving refund of a debt determines the interest pace of a bond. Because of its tax exemptions municipal bonds tend to have a higher(prenominal) yield on investment than do incorpo enumerate bonds (http://www.e-personalfinance.com/types-of-bonds/municipal-bonds-vs-corporate-bonds). In this particular case municipal bonds are of equal bump and yield 6%. An investor would opt a rate that equals the municipal yield to the corporate after tax yield. 8% corporate yield 6% municipal yield After Tax Yield = taxable Interest Rate × (1 tax rate) (http://allfinancialmatters.

com/2006/10/20/how-to-calculate-tax-equivalent-yield/) 8% (1-tax rate) = after tax yield (6%) 8(8-tax rate) = 6 2= 8Tax rate Tax rate = 2/8 = .25 2.5 Kendall Corners Inc recently reported net income of $ 3.1 million, and disparagement of $500,000. What was its net gold current? Assume it had no amortization expense. In order to calculate net cash shine we need to add the non cash expenses back to net interlock (http://blog.arborinvestmentplanner.com/2011/05/what-is-net-cash- lam/) Net cash flow = Net income + dispraise Net Income = 3100000, disparagement = 500000 NCF = 3100000 + 500000 NCF = 3600000 = $3.6 million 3.1 Greene Sisters has a DSO of 20 days....If you exigency to get a bounteous essay, order it on our website: Orderessay

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