Assuming an after-tax rate of return of 10 percent, John should prefer to pay an expense...

Question

Question

Assuming an after-tax rate of return of 10 percent, John should prefer to pay an expense of $85 today instead of an expense of $100 in one year.

True or False

business accounting

Answer 1

Answer #1

Present value of $100=$100*Present value of discounting factor(rate%,time period)

=$100/1.1

=90.91(Approx).

Hence $85 must be paid today having lower present value.True.

Answer 2

Similar Homework Help Questions

Assume Rafael can earn a(n) 5 percent after-tax rate of return. Use Exhibit 3.3. Would he...

Assume Rafael can earn a(n) 5 percent after-tax rate of return. Use Exhibit 3.3. Would he prefer $1,100 today or $1,650 in five years? O $1,100 today $1,650 in five years
If Julius has a 32 percent tax rate and a 10 percent after-tax rate of return,...

If Julius has a 32 percent tax rate and a 10 percent after-tax rate of return, a $36,000 tax deduction in two years will save how much tax in today's dollars? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.) $11,520. $29,736. None of the choices are correct. $36,000. $9,516.
1. If Joel earns a 11 percent after-tax rate of return, $10,000 received in two years...

1. If Joel earns a 11 percent after-tax rate of return, $10,000 received in two years is worth how much today? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.) Multiple Choice $10,000. $8,990. $8,120. $11,100. None of the choices are correct. 2. If Lucy earns a 7 percent after-tax rate of return, $20,000 received in four years is worth how much today? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.) Multiple Choice $20,000. $18,624. $21,909. $15,260....

QUESTION 7 Assume Rafael cam cam an 7 percent after-tax rate of retum. He can receive...

QUESTION 7 Assume Rafael cam cam an 7 percent after-tax rate of retum. He can receive $2,000 today or $3,000 in five years. What is the present value of the 53,000 payment due in five years? QUESTIONS Assame Ellina carns a 9 percent after-tax rate of return, and that she owes a friend $2,400. She can pay the friend $2,400 today or 53,500 in four years. What is the present value of the 53,500 payment due in four years QUESTIONS...
If Thomas has a 37 percent tax rate and a 7 percent after-tax rate of return,...

If Thomas has a 37 percent tax rate and a 7 percent after-tax rate of return, $78,500 of income in five years will cost him how much tax in today's dollars? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.) $29,045. $78,500. None of the choices are correct. $57,646. $20,709.
If Julius has a 22 percent tax rate and a 8 percent after-tax rate of return,...

If Julius has a 22 percent tax rate and a 8 percent after-tax rate of return, $31,000 of income in three years will cost him how much tax in today's dollars? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.) Multiple Choice О $5,415 $24,614 O $6,820 $31,000 O O None of the choices are correct.

Calculate the after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in...

Calculate the after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in the 10 percent marginal tax bracket. Compare this yield to a 7.16 percent, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. Repeat the calculations and comparison for an investor in the 33 percent marginal tax bracket. The after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in the 10 percent marginal tax bracket is 7.34 %. (Round...
If the required rate of return on the stock is 15 percent, what should the fair...

If the required rate of return on the stock is 15 percent, what should the fair value be four years from today? 4 Consider the following two banks: Bank 1 has assets composed solely of a 10-year, 12 percent coupon, $1 million loan with a 12 percent yield to maturity. It is financed with a 10-year, 10 percent coupon, $1 million CD with a 10 percent yield to maturity. Bank 2 has assets composed solely of a 7-year, 12 percent,...
If Lucy earns a 11 percent after tax rate of return, $17,000 received in four years...

If Lucy earns a 11 percent after tax rate of return, $17,000 received in four years is worth how much today? Use Exhibit 31 (Round discount factor(s) to three decimal places.) 21 Multiple Choice $17.000 $15,154 $19,379 S11203

John is evaluating a stock that he believes will pay a dividend equal to $2.75 in...

John is evaluating a stock that he believes will pay a dividend equal to $2.75 in exactly one year from today. Further, John expects that in addition to the dividend he will be able to sell the stock for the amount $45 per share also one year from today. Using this information, what is the stock's price today if the required rate of return on the stock is 11.00%?