1. Many people believe that the federal income tax is far too complex. But are there good reasons for this complexity? Provide an example of complexity in the Federal individual income tax code and describe the reason lawmakers included the provision in the tax code. Do you believe complexity is a necessary part of the internal revenue code? Explain your answer.
2. The government allows first year expensing under §179 and bonus depreciation. Why are these provisions included in the Internal Revenue Code? Do you believe the inclusion of these provisions achieved the goals of Congress? Why or why not?© BrainMass Inc. brainmass.com October 17, 2018, 11:55 am ad1c9bdddf
1. Complexity is not needed to raise revenues. We could all just paid a flat percent of gross income and have NO deductions. That would be simple and effectively raise the taxes needed to run the government. In fact, flat tax has been a splinter group trying to promote such a program. Why is this not likely to happen? The government uses the tax code to promote and encourage behaviors that it would like to incentivize. That is, it is an instrument of social engineering. When car sales were slumping during the recession and they wanted to improve the economy, the US government came up with "cash for clunkers." This gave a tax credit to certain individuals who bought certain cars within a certain time frame. So, now everyone had to "test" to see if they qualified, if the ...
Your discussion is 529 words and a reference to understanding section 179 and bonus depreciation.
1) What is the net present value of the project?
2) a. What is the gain from merger? b. What is the cost of the cash offer? c. What is the NPV of the acquisition under the cash offer?
25. Project Evaluation.
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25.
Year Unit Sales
It is expected that net working capital will amount to 20 percent of sales in the following year. For example, the store will need an initial (year-0) investment in working capital of .20 × 22,000 × $40 = $176,000. Plant and equipment necessary to establish the Giftware business will require an additional investment of $200,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm's tax rate is 35 percent. What is the net present value of the project? The discount rate is 20 percent.
Merger Gains and Costs.
8. Merger Gains and Costs. Velcro Saddles is contemplating the acquisition of Pogo Ski Sticks, Inc. The values of the two companies as separate entities are $20 million and $10 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $500,000 per year in perpetuity. Velcro Saddles is willing to pay $14 million cash for Pogo. The opportunity cost of capital is 8 percent.
a. What is the gain from merger?
b. What is the cost of the cash offer?
c. What is the NPV of the acquisition under the cash offer?
Attached you will find the PDF documents to some practice study problems that I am still trying to grasp and understand. These are the ones that I did not know how to do. Your help is greatly appreciated.
Chapter 8: practice problem 25 on PDF document page 234
Chapter 21: practice problem 8 on PDF document page 595View Full Posting Details