1) In 2010, High Umbrella Corp. had sales of $660,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $500,000, $90,000, and $85,000, correspondingly. Additionally, company had the interest expense of $90,000 and tax rate of 35 percent. (avoid any tax loss carryforward provisions or carryback.)
Assume High Umbrella Corp. paid out $54,000 in cash dividends. Describe in detail whether it is possible or not? If spending on net fixed assets and net working capital was zero, and if no new stock was issued in the year, find the net new long-term debt?
2) Salvage price of retired airplanes won’t match remaining UCC each contributes to suitable CCA pool. Describe in detail why this is not a problem when we utilize PVCCATS formula to estimate depreciation tax shields?