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1)Duela Dent is single and had $196,000 in taxable income
1)Duela Dent is single and had $196,000 in taxable income. Use the rates from Table 2.3. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Taxable income Tax Rate 0- 10% 12 TABLE 2.3 Personal tax rates foi 2018 (unmarried individuals) 22 $ 9,525 9,525 38,700 38,700 82,500 82,500– 157,500 157,500- 200,000 200,000- 500,000 500,000+ 24 32 35 37
2)Consider the following stocks Stock Initial Price (t-0) Final Price (t-1) Number of shares (in millions) A 20 B 15 90 80 12 2 1- Calculate the initial price of a price weighted index that comprises both stocks A and B. 2. Calculate the final price of the same price-weighted index that comprises both stocks A and B. 3. Find the percentage change in the price weighted average of the two stocks. 4- Calculate the final price of a market value weighted index that comprises A and B (assume that the initial price of the index is 100). Question 1 of 13 5. What is the percentage change of the value-weighted index? * Assume now that at t-o, stock B undergoes a 2 for 1 split (see new table below: Stock Initial Price (0) Final Price (1) Number of shares (in millions) 12 A 20 40 15 45 6. What is the new divisor for the price weighted index?
2- Calculate the final price of the same price-weighted index that comprises both stocks A and B. 3. Find the percentage change in the price-weighted average of the two stocks. 4- Calculate the final price of a market value weighted index that comprises A and B (assume that the initial price of the index is 100). 5. What is the percentage change of the value-weighted index? Assume now that at t-0, stock B undergoes a 2 for 1 split (see new table below): Stock Initial Price (t-0) Final Price (t-1) Number of shares in millions) ? 20 40 15 45 12 4 n 1 of 13 6- What is the new divisor for the price-weighted index? 7. Calculate the percentage change in the adjusted price weighted index after the stock split. 7. Calculate the percentage change in the value-weighted index after the stock split.
Expert Solution
1)Computation of Tax liability of Duela Dent(Single) for 2018.
Taxable Income(In $)(A) Rate(B) Tax Liability(In $)(A*B)
0-9,525 10% $952.5
9,525-38,700 12% $3,501
38,700-82,500 22% $9,636
82,500-157,500 24% $18,000
157,500-196,000 32% $12,320
Total tax liability = 952.5+3,501+9,636+18,000+12,320= $44,409.50
2)
Q - 1
The value of a price-weighted index = the total sum of the prices / divisor.
Divisor = number of stocks in the index in case there is no spin off or split.
Hence, initial price of the index = Average of the prices at (t = 0) = (20 + 80) / 2 = 50
Q - 2
Final price of the index = Average of the prices at (t = 1) = (15 + 90) / 2 = 52.50
Q - 3
%change = Final Price / Initial Price - 1 = 52.50 / 50 - 1 = 5%
Q - 4
Initial market value of the index = Sum of (P0 x N0) = 20 x 12 + 80 x 2 = 400
This was assigned a price of 100
Final market value = Sum of (P1 x N1) = 15 x 12 + 90 x 2 = 360
Hence, the final price = Final value x Initial price / initial value = 360 x 100 / 400 = 90
Q - 5
%age change = Final Price / Initial Price - 1 = 90 / 100 - 1 = -10%
Q - 6
New divisor = (20 + 80) / (20 + 40) = 5/3 = 1.67
Q - 7
It will still be the same as before i.e. 5%
Q - 8
It will still be the same as before i.e -10%
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