You are the tax advisor to a company (the “Company”) that had $1,000 in apportion able business income for tax year 2013 The Company did business in 4 states in 2013 and had nexus in each of the 4 states The breakdown of its property, payroll and sales factors in each state is set forth below Each State’s tax rate is set forth in the last column

                 Payroll        Property

State A         100            100

State B         100            100

State C         200            200

State D         600            600

Total             1000          1000  

State A uses a single-sales factor formula State B uses the three-factor formula, but it triple-weights the sales factor State C uses the three-factor formula, but it double-weights the sales factor State D uses the traditional three-factor formula (property, payroll and sales) and weights each factor equally Assume that no factors are thrown-out, even if zero

1 Calculate the taxes owed by the Company in each state for the 2013 tax year and the total taxes owed by the Company for the year

2 Would the total 2013 taxes owed by the Company be higher or lower if each of the States used the traditional three-factor formula (with each factor equally weighted) and why? (You are not required to calculate the exact taxes on this question, but you may)

3 If the Company were able to show using separate accounting that only $300 of its income for the tax year should be apportioned to State A (which would result in $150 taxes owed for 2013), would this prove that State A’s apportionment calculation was unconstitutional when applied to the taxpayer? Is State A’s use of a single-sales factor formula unconstitutional?

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

1. AbbVie is a pharmaceutical company whose well known drugs include Humira andSynthroid. AbbVie stock is currently $60.90/share, up almost 5% since the beginning ofthe year. You believe that the stock price will rise as a result of a coming surge inhealthcare spending in emerging market countries. You have $182,700 to invest and areconsidering the following 3 investment strategies:i. Use your capital to purchase shares outright.ii. Use your capital plus borrow $91,350 from your broker to purchaseshares.iii. Use your capital and borrow the maximum allowable amount (underRegulation T) from your broker to purchase shares.For each of the 3 investment strategies:a. How many shares of AbbVie stock do you purchase?b. Show your initial balance sheets.c. What is your leverage (total assets to equity) ratio?Answer parts d., e., f., g. and h. for strategy iii. only:d. Suppose that the price of a share of AbbVie stock immediately rises to $63.95. Whatis the percentage change in the price of AbbVie stock? What is your new balancesheet? What is the percentage change in owner’s equity? What is your leverageratio?e. Suppose instead that the price of AbbVie stock immediately falls to $57.86. What isthe percentage change in the price of AbbVie stock? What is your new balance sheet?What is the percentage change in owner’s equity? What is your leverage ratio?f. What do you notice about the cyclicality of the leverage ratio? In other words, evenwith no change in borrowing, how does the behavior of the asset price affectleverage?g. Prior to the financial crisis, we saw high and increasing leverage ratios at a number offinancial institutions. For example, some estimates put Bear Stearns’ leverage ratio at35 in early 2008, and Lehman’s leverage ratio at approximately 30 prior to its failure.Just prior to being put into government conservatorship, Freddie Mac’s leverage ratiowas estimated to be approximately 100. Consider strategy iii above. Whatpercentage decline in the price of the asset on the balance sheet (AbbVie stock) willresult in a loss of all equity? Consider instead that, with $182,700 of your owncapital, you can borrow $6,211,800 and purchase 105,000 shares of AbbVie stock at$60.90 per share. What is your leverage (total asset to equity) ratio? Now whatpercentage decline in the price of AbbVie stock will result in a loss of all equity?Finally, consider using your own capital of $182,700 plus borrowings of $18,087,300to purchase 300,000 shares of AbbVie stock at $60.90 per share. What is yourleverage (total asset/equity) ratio? What percentage decline in the price of AbbViestock will result in a loss of all equity? What can you say about the degree of leverageand the risk of insolvency due to declines in asset prices?

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

1 Using the AD-AS framework consider the following scenario The economy is operating at full employment when an unanticipated crisis hits the banking sector that results in a credit squeeze (4 marks)

a Explain in detail how this event in the financial system is likely to impact the real economy and what will be the implications for unemployment and inflation in the short term In your answer be sure to also address which components of the AD-AS model may be impacted by this scenario Your answer should be around ½ page (3 marks)

b Using the diagram below, illustrate how this scenario will:

i) Influence equilibrium in the short run (SR) labelling the new SR equilibrium A (05 mark)

ii) Influence equilibrium in the long run (LR) assuming no government or policy intervention labelling the new LR equilibrium B (05 mark)

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

1. Suppose you bought 300 shares of stock at an initial price of $39 per share. The stock paid a dividend of $0.32 per share during the following year, and the share price at the end of the year was $45. Compute your total dollar return on this investment. (Omit the “$” sign in your response.)

2. Suppose you bought 200 shares of stock at an initial price of $38 per share. The stock paid a dividend of $0.30 per share during the following year, and the share price at the end of the year was $41.
a. What is the capital gains yield? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Capital gains yield ? %

b. What is the dividend yield? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Dividend yield ? %

c. What is the total rate of return on the investment? (Round your answer to 2 decimal places. Omit the”%”sign in your response.)

Total rate of return ? %

3. The rate of return on Cherry Jalopies, Inc., stock over the last five years was 17 percent, 11 percent, -1 percent, 7 percent, and 10 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 22 percent, -1 percent, 5 percent, and 12 percent. Calculate the variances and the standard deviations for Cherry and Straw. (Round your variance to 5 decimal places and standard deviation to 2 decimal places. Omit the “%” sign in your response.) Cherry Straw

Variance ? ?

Standard deviation ? % ? %

4. A particular stock has a dividend yield of 1.9 percent. Last year, the stock price fell from $76 to $70. What was the return for the year? (Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal place. Omit the “%” sign in your response.)

5. A stock has had returns of 25 percent, 12 percent, 6 percent, -17 percent, -6 percent, and 22 percent over the last six years. What are the arithmetic and geometric returns for the stock? (Round your answer to 2 decimal places. Omit the “%” sign in your response.) Arithmetic return ? %

Geometric return ? %

6. Your grandfather invested $1,000 in a stock 41 years ago. Currently the value of his account is $221,000. What is his geometric return over this period? (Round your answer to 2 decimal places. Omit the “%” sign in your response.) Geometric return ? %

7. You have found an asset with a 12.10 percent arithmetic average return and a 9.60 percent geometric return. Your observation period is 30 years. What is your best estimate of the return of the asset over the next 5 years? 10 years? 20 years? (Round your answer to 2 decimal places. Omit the “%” sign in your response.) 5 years ? %

10 years ? %

20 years ? %

 

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"