Quiz 4 answers
This presentation is the property of its rightful owner.
Sponsored Links
1 / 26

Quiz 4 Answers PowerPoint PPT Presentation


  • 69 Views
  • Uploaded on
  • Presentation posted in: General

Quiz 4 Answers. November 8, 2013.

Download Presentation

Quiz 4 Answers

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Quiz 4 answers

Quiz 4 Answers

November 8, 2013


Quiz 4 answers

  • At the beginning of the year, a pie company has $P in the bank. During the year it takes in $A for pie sales. It pays $B for pie ingredients, and $C for wages and rent. It pays taxes at t%. At the end of the year, the amount the company has in the bank is:

    • P + (A-B-C)t

    • (P+A)t – B - C

    • P + (A-B-C)(1-t)

    • P + A – Bt - Ct


Quiz 4 answers

A

A-B-C

B+C

(A-B-C)(1-t)

After-Tax

Analysis


Quiz 4 answers

  • A pie company, otherwise identical to the pie company in the previous question, also has an oven, purchased 10 years ago, which according to Revenue Canada rules depreciated by $D during the year. At the end of the year, the amount the company has in the bank is:

    • P + (A-B-C-D)t

    • (P+A)t – B – C - D

    • P + (A-B-C-D)(1-t) + D

    • P + A – (B+C+D)t


Quiz 4 answers

A

B+C

A-B-C

D

A-B-C-D

(A-B-C-D)(1-t)

(A-B-C-D)(1-t)+D


Quiz 4 answers

  • Yet a third pie company starts off the year with $P. It sells $A in pies, and pays no wages or rent, but it does buys an oven for $F. If Revenue Canada allows ovens to depreciate at d% per year, at the end of the year, the amount the company has in the bank is:

    • P + A(1-t) - F

    • P + (A-F)(1-t)

    • P +A(1-t) –F(CTF)

    • P + (A-Fd/2)(1-t) – F + Fd/2


Quiz 4 answers

A

A-Fd/2

Fd/2

(A-Fd/2)(1-t)

(A-Fd/2)(1-t)+Fd/2 - F

F


Quiz 4 answers

  • A fourth pie company starts the year with $P and an oven whose undepreciated capital cost (UCC) is $G. It sells $A in pies, and pays no wages or rent, but it does sell the oven for $G. At the end of the year, the amount the company has in the bank is:

    • P + A(1-t) + G

    • P + A + G(CSF)

    • P + A(1-t) + G(CTF)

    • P + (A+G)(1-t)


Cca recapture

CCA Recapture

You buy an asset for $P. It is the only asset in its class, and it depreciates over n years. At the beginning of year n, its book value is UCC(n)

If we now sell it for $S, then:

1. If S < UCC(n), no tax is owed.

2. If P > S > UCC(n), you owe tax on S-UCC(n)

3. If S > P, you owe tax on P – UCC(n), and

S-P is a capital gain.


Quiz 4 answers

A

A

A(1-t)

A (1-t)+G


Quiz 4 answers

  • A fifth pie company starts the year with $P and an oven whose undepreciated capital cost (UCC) is $G. (This oven was originally bought for $3G.) It sells $A in pies, and pays no wages or rent, but it does sell the oven for $2G. At the end of the year, the amount the company has in the bank is:

    • P + A(1-t) + 2G

    • P + A + 2G(CSF)

    • P + A(1-t) + 2G(CSF)

    • P + (A+G)(1-t) + G


Cca recapture1

CCA Recapture

You buy an asset for $P. It is the only asset in its class, and it depreciates over n years. At the beginning of year n, its book value is UCC(n)

If we now sell it for $S, then:

1. If S < UCC(n), no tax is owed.

2. If P > S > UCC(n), you owe tax on S-UCC(n)

3. If S > P, you owe tax on P – UCC(n), and

S-P is a capital gain.


Quiz 4 answers

A+G

A+G

(A+G)(1-t)

(A+G) (1-t)+G


Quiz 4 answers

  • A sixth pie company starts the year with $P and an oven whose undepreciated capital cost (UCC) is $G. (This oven was originally bought for $2G.) It sells $A in pies, and pays no wages or rent, but it does sell the oven for $3G. At the end of the year, the amount the company has in the bank is:

    • P + A(1-t) + 3G

    • P + A + 3G(CSF)

    • P + (A+2G)(1-t) + G(1-t/2)

  • P + (A+G)(1-t) + G


  • Cca recapture2

    CCA Recapture

    You buy an asset for $P. It is the only asset in its class, and it depreciates over n years. At the beginning of year n, its book value is UCC(n)

    If we now sell it for $S, then:

    1. If S < UCC(n), no tax is owed.

    2. If P > S > UCC(n), you owe tax on S-UCC(n)

    3. If S > P, you owe tax on P – UCC(n), and

    S-P is a capital gain. (Taxed at half the rate for profits)


    Quiz 4 answers

    A+G

    A+G

    (A+G)(1-t)

    (A+G) (1-t)+G+G(1-t/2)


    Quiz 4 answers

    • I have a profitable company, and have just calculated the CTF to be used in after-tax analyses of possible expansion plans. Now I learn that inflation is predicted to be higher than I expected during the coming few years. If I correct my calculations to take inflation into account, the inflation-adjusted CTF will be:

      • Higher than the original CTF

      • Lower than the original CTF

      • Unchanged

      • Can’t say without additional information


    Quiz 4 answers

    • I have a profitable company, and have just calculated the CTF to be used in after-tax analyses of possible expansion plans. Now I learn that inflation is predicted to be higher than I expected during the coming few years. If I correct my calculations to take inflation into account, the inflation-adjusted CTF will be:

      • Higher than the original CTF

      • Lower than the original CTF

      • Unchanged

      • Can’t say without additional information


    Quiz 4 answers

    • If the taxation rate for a company increases, the value of the CTF for that company will:

      • Increase

      • Decrease

      • Remain the same

      • Can’t tell without more information


    Quiz 4 answers

    • If the taxation rate for a company increases, the value of the CTF for that company will:

      • Increase

      • Decrease

      • Remain the same

      • Can’t tell without more information


    Quiz 4 answers

    • If a company learns that there will be inflation over the next few years, the value of the CTF it uses in its after-tax analyses will:

      • Increase

      • Decrease

      • Remain the same

    • Can’t tell without more information


    Quiz 4 answers

    • If a company learns that there will be inflation over the next few years, the value of the CTF it uses in its after-tax analyses will:

      • Increase

      • Decrease

      • Remain the same

    • Can’t tell without more information


    Quiz 4 answers

    • I have just calculated the IRR for a project, using a pre-tax analysis. If I am taxed at 50%, when I calculate the after-tax IRR, it will be:

      • Higher than the pre-tax IRR

      • Lower than the pre-tax IRR

      • Unchanged

  • Can’t say without additional information


  • Quiz 4 answers

    After-tax IRR lower

    S

    P

    S(1-t)

    P * CTF


    Quiz 4 answers

    After-tax IRR higher

    S

    P

    S (capital gain)

    P * CTF


    Quiz 4 answers

    • I have just calculated the IRR for a project, using a pre-tax analysis. If I am taxed at 50%, when I calculate the after-tax IRR, it will be:

      • Higher than the pre-tax IRR

      • Lower than the pre-tax IRR

      • Unchanged

  • Can’t say without additional information


  • Login