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Although the benefit principle of taxes is founded on two notions, it is critical for business administration students to learn and understand the fundamental principles of income taxation. The first and most important point is that people who gain from services should pay for them. Second, taxation should be proportional to the amount of benefits or services received.
An income tax is generally a tax levied on persons or corporations (taxpayers) based on their earnings or profits (often referred to as taxable income). In most cases, income tax is calculated as the result of a tax rate multiplied by the taxable income.
Taxation rates may differ depending on the taxpayer's attributes and the source of income.
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PRINCIPAL OF INCOME TAXATION
The benefit principle of taxation is based on two ideas. The first and foremost is that those who benefit from services should be the ones who pay for them. Secondly, people should pay taxes in proportion to the amount of services or benefits they receive.
Explanation:
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A rumor of "right sizing" at Ojai's engineering firm has him and his wife, Kaya, concerned about their preparation for meeting financial emergencies. Help them calculate their net worth or complete Worksheet 4, and calculate and interpret the current ratio, given the following assets and liabilities:Checking account ………………… $2,000Savings account ………………….. $4,000Stocks ……………………………. $8,000Utility bills ………………………. $500Credit card bills …………………. $1,000Auto loan ……………………….. $2,600
Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Effective Decrease in Outstanding interest interest balance balance 1/1/2021 $207,020 6/30/2021 $7,000 $6,211 $789 206,230 12/31/2021 7,000 6,187 813 205,417 6/30/2022 7,000 6,163 837 204,580 12/31/2022 7,000 6,137 863 203,717 6/30/2023 7,000 6,112 888 202,829 12/31/2023 7,000 6,085 915 201,913 6/30/2024 7,000 6,057 943 200,971 12/31/2024 7,000 6,029 971 200,000 What is the annual stated interest rate on the bonds?a. 3.5%b. 6%c. 7%d. none of the above
What does a MRTS = mean? It means that if the input on the horizontal axis is increased by one unit, then the input on the vertical axis ▼ increases decreases by units and output will ▼ increase decrease not change .
Yakov is skilled at making both bracelets and necklaces. Yakov has no preference between making bracelets or necklaces since he earns the same amount from the two activities. If the selling price of necklaces increases from $12 to $24, then Yakov's opportunity cost of making bracelets and making bracelets is now profitable than making necklaces. Suppose that the bracelets market consists of several suppliers like Yakov who are skilled at making both bracelets and necklaces. Which of the following is likely to happen to the supply curve of bracelets when the price of a necklaces increases?a. It shifts to the right b. It shifts to the left c. It does not change
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Answer:
People didn't want to trade their goods for other goods anymore.
Explanation:
People wanted to have both their item and another item (which they wanted to buy). Then currency was invented.
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Answer: Dwayne's investment will be worth $89,961.02 after the last annuity payment is made.
Since Dwayne contributes $4700 at the beginning of each year, we need to calculate the future value of an annuity due.
We use this formula for our calculations:
Substituting the values we get,
B) Convenience products
C) Capital items
D) Specialty items
E) Repair items
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Answer:
C) Capital items
Explanation:
Capital items are the goods that should have physical existence also it is to be used at the time of manufacturing the product and services. It involves various items like - building, equipment, tools, etc
These are not categorized into a finished goods but are used for making the finished goods
Therefore in the given situation, the option C is the most appropriate and hence the same is to be considered
Final answer:
Capital items are industrial products that aid in the buyer's production or operations, including installations and accessory equipment.
Explanation:
The correct answer is C) Capital items. Capital items are industrial products that are used in the production or operations of a buyer's business. These can include installations and accessory equipment that aid in the overall functioning of the business.
For example, if a manufacturing company needs machinery to produce its products, that machinery would be considered a capital item. It is a long-term investment that is essential for the company's operations.
Other examples of capital items include vehicles, computer systems, and specialized tools or equipment.
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b. a gift is always a contract, but a bailment is generally not a contract.
c. a gift requires delivery, but a bailment does not.
d. in a bailment, only possession of the property is transferred to the bailee, whereas with a gift, both possession and ownership must pass to the donee.
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Answer: d. in a bailment, only possession of the property is transferred to the bailee, whereas with a gift, both possession and ownership must pass to the donee.
Explanation:
When you give a person a gift, you are giving the person both ownership of that gift and the possession as well. For instance, if you give a person a car as a gift, that person now owns the car and will use it as they please.
With a bailment, there is no transfer of ownership. The bailor is simply giving the bailee possession of the property in question which means that after the bailee is done with the property, they have to return it back to the bailor.
Steel 1.18 30%
Financial
Services 1.14 70%
The average tax rate for these industries is 40%.
In the most recent period, the company you are analyzing earned 70% of its operating income from steel and 30% from financial services. The firm also had a debt/equity ratio of 150%, and a tax rate of 30%. Estimate the levered beta for the company.
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Answer:
The levered beta for the company is 1.93.
Explanation:
Levered beta for the company = (Weight of steel business*levered beta of steel business) + (Weight of financial services business*levered beta of financial services business)
Levered beta of steel business = Unlevered beta of steel sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)
levered beta of financial services business = Unlevered beta of financial services sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)
Unlevered beta of steel sector = Current beta of steel sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)
Unlevered beta of steel sector = 1.18/[1+((1-0.4)*0.3)]
Unlevered beta of steel sector = 1.18/[1+(0.6*0.3)]
Unlevered beta of steel sector = 1.18/(1+0.18)
Unlevered beta of steel sector = 1.18/1.18
Unlevered beta of steel sector = 1
Levered beta of steel business = 1*[1+((1-0.3)*1.5)]
Levered beta of steel business = 1*[1+(0.7*1.5)]
Levered beta of steel business = 1*(1+1.05)
Levered beta of steel business = 1*2.05
Levered beta of steel business = 2.05
Unlevered beta of financial services sector = Current beta of financial services sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)
Unlevered beta of financial services sector = 1.14/[1+((1-0.4)*0.7)]
Unlevered beta of financial services sector =1.14/[1+(0.6*0.7)]
Unlevered beta of financial services sector = 1.14/(1+0.42)
Unlevered beta of financial services sector = 1.14/1.42
Unlevered beta of financial services sector = 0.80
Levered beta of financial services business = 0.8*[1+((1-0.3)*1.5)] = 0.8*[1+(0.7*1.5)] = 0.8*(1+1.05) = 0.8*2.05 = 1.64
Levered beta for the company = (0.7*2.05) + (0.3*1.64)
Levered beta for the company = 1.44 + 0.49
Levered beta for the company = 1.93
Hence, the levered beta for the company is 1.93.
Final answer:
To estimate the levered beta for a company with operations in multiple sectors - steel and financial services in this case - you take a weighted average of the sector betas based on earnings distribution to get the unlevered beta. You then adjust for the company's debt/equity ratio and tax rate to get the levered beta. The estimated levered beta for this company is 2.378.
Explanation:
To estimate the levered beta for the company, we first need to consider the betas for each of the sectors the company operates in - steel and financial services. Given the firm's earnings distribution, the unlevered beta is computed as 0.7*Steel Beta + 0.3*Financial Services Beta = 0.7*1.18 + 0.3*1.14 = 1.16.
Next, to calculate the levered beta, we need to factor in the firm's debt/equity ratio. We use the formula for the levered beta: Levered Beta = Unlevered Beta * (1 + (1 - Tax Rate) * D/E ratio). Substituting the values we have: Levered Beta = 1.16 * (1 + (1 - 0.3) * 1.5) = 1.16 * 2.05 = 2.378. Therefore, the estimated levered beta is 2.378.
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Compute Radar’s additional income (ignore taxes) if it accepts this order.
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Answer:
Radar's additional income for accepting the order is calculated as follows:
Sales - 320 x $460 = $147,200
less Cost of Sales = 320 x $180 + $48,000 = $105,600
Additional Income = $41,600
Explanation:
The additional income of $41,600 is $147,200 - $105,600, which is the result of deducting cost of sales from Sales.
The cost of sales includes the variable cost per bike, including the incremental fixed costs ($48,000) to make this order.
To make a decision whether to accept an order or not, the company needs to consider all variable costs, including the incremental fixed costs. The resulting additional income is what is available to offset the fixed costs.