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Homework answers / question archive / 1)A machine for an assembly line costs $50,000 and has an Internal Revenue Service (IRS) class life of 10 years
1)A machine for an assembly line costs $50,000 and has an Internal Revenue Service (IRS) class life of 10 years. What is the allowable MACRS deduction for depreciation in each year of the life of the machine?
2) When investors purchase National Australian Bank shares in a public offering it is an example of the None of the answers are correct primary derivative d bond secondary
3)Read ALL of the following choices. Which ONE answer is TRUE? a. Preference shares usually expire at a fixed date. b. A share is a potentially long-lived investment, but a standard bond usually expires at a fixed date. O Bondholders have voting rights on the election of board members in a corporate firm. O d. None of the answers are true. O e Dividend is a contractual interest obligation an issuing firm has to pay to its shareholders.
1)
| Year-1 | Year-2 | Year-3 | Year-4 | Year-5 | Year-6 | Year-7 | Year-8 | Year-9 | Year-10 | Year-11 | |
| Cost of asset | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 | $50,000.00 |
| Depreciation rate | 10.00% | 18.00% | 14.40% | 11.52% | 9.22% | 7.37% | 6.55% | 6.55% | 6.56% | 6.55% | 3.28% |
| Depreciation | $ 5,000.00 | $ 9,000.00 | $ 7,200.00 | $ 5,760.00 | $ 4,610.00 | $ 3,685.00 | $ 3,275.00 | $ 3,275.00 | $ 3,280.00 | $ 3,275.00 | $ 1,640.00 |
2)
Before we proceed ket us know the meaning of each of these options.
Primary Market - Primary Market is the one where new securites come up. Securities are first created here and then sold to Institutional, Qualified and retail investors. All the new securities are first traded in the primary market.
Secondary Market - Secondary markets are where securities which are already brought by investors were sold again. Generally this is like securites are brought to the stock exchanges . Common examples for better understanding were the New York Stock Exchange, National Stock Exchange etc
Derivative - A derivative is a contract between two parties which derives its value from the underlying asset. It required minimum investment and settlement takes place based on the value of the underlying asset.
Bond - Bond is a part of debt raised by corporates or government inorder to raise money. This is simply like borrowing but it is made into several parts inroder to pool funds.
Public offering is a way of raising funds in which money is pooled by the company. This is nothing but the securities are first created and sold to various invetors in lots. Generally the investor who gets the lot can sell it in stock exchanges after listing happens. Hence public offering is a clear cut case of PRIMARY MARKET transaction
3)
A share is a potentially long-lived investment as shares donot have a fixed expiry or maturity date. However, standard bond is an instruement that represent bondholders loan to the company, and thus usually expires at a fixed date at which the principal amount is repayable by the company to the bondholders.
REASONS FOR OTHERS BEING FALSE
a: Preference shares, also known as preferred stock are the stock on which a fixed rate of dividend is payable by the company from its profits only and at the time of bankruptcy the preference shareholders are paid from the companies assets before the common stock holders, but they donot have any fixed maturity date in general.
c: Bondholders are the creditors to the company, since they are not the owners of the company they donot have any voting rights on the election of the board members in a corporate firm.
d. as part b is correct, this option is not applicable.
e. Dividend payment to the shareholders is merely the distribution of profits earned by the company to its owners. There is no contractual interest obligation of the issuing firm to pay dividend to its shareholders.
