(Answered) Al simpson helped start excel systems in 2010 at the time

Finance

Al Simpson helped start Excel Systems in 2010. At the time, he purchased 110,000 shares of stock at $1 per share. In 2015, he has the opportunity to sell his interest in the company to Folsom Corporation for $50 a share in cash. His capital gains tax rate would be 15%.

a. If he sells his interest, what will be the value for before-tax profit, taxes and after tax profit?

b. Assume, instead of cash, he accepts Folsom Corporation stock valued at $50 per share. He pays no tax at that time. He holds the stock for five years and then sells it for $82.50. (assume no cash dividends). What will be the value for before-tax profit, taxes and after tax profit in 2020? His capital gains tax is once again 15%.

c. What is the present value (year 2015) of the after-tax profit computed in b? Use 7% discount rate.

d. Which option should Al select in 2015?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92566706
Price:- $20

Verified Expert

Priced at $40 Now at $20, Verified Solution

Have any Question?Write your Review or question?

Related Questions in Basic Finance

B24 amp co stock has a beta of 151 the current risk-free

B24 & Co stock has a beta of 1.51, the current risk-free rate is 3.01 percent, and the expected return on the market is 10.51 percent. What is B24 & Co's cost of equity? There's nothing else to add to the question.

Assume the standard deviation of dell stock is 24 and the

Assume the standard deviation of Dell stock is .24 and the standard deviation of General Motors is .17. If you put 130% of your wealth in Dell and take a 30% short position in General Motors and the standard deviation of ...

Sidney took a cash advance of 300 by using checks linked to

Sidney took a cash advance of $300 by using checks linked to her credit card account. The bank charges a cash advance fee of 4 percent on the amount borrowed and offers no grace period on cash advances. Sidney paid the b ...

A 1000 par value bond was issued 15 years ago at a 12

A $1,000 par value bond was issued 15 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond thr ...

You purchases a house for 18133300 you made a down payment

You purchases a house for $181,333.00 . You made a down payment of 20,000 and the remainder of the purchase price was financed with a mortgage loan. The mortgage loan is a 30 year mortgage with an annual interest rate of ...

Asset management ratios corn products corp ended the year

Asset Management Ratios Corn Products, Corp. ended the year 2008 with an average collection period of 32 days. The firm's credit sales for 2008 were $10.7 million. What is the year-end 2008 balance in accounts receivable ...

You are a junior analyst and you have been asked to

You are a junior analyst and you have been asked to forecast sales for lululemon for 2012. At the end of 2011, lululemon operated 147 corporate stores in North America (42 in Canada and 105 in the US). Lululemon plans to ...

Discuss the core business objectives and the primary focus

Discuss the core business objectives and the primary focus of the financial business model.

1 your firm expects to incur a 500k loss in year 1 and make

1. Your firm expects to incur a ($500K) loss in year 1 and make $100K of net income in year 2 and $300K of net income in year 3. The retention ratio is projected to be 100%. The beginning equity balance on the balance sh ...

A 1000 par value bond sells for 1216 it matures in 20 years

A $1,000 par value bond sells for $1,216. It matures in 20 years, has a 14 percent coupon, pays interest semiannually, and can be called in 5 years at a price of $1,100. Calculate the bond's yield to maturity.

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert