1. (40 points) You are evaluating two potential public projects to implement in your local jurisdiction. Both projects have a 10 year time horizon. For Project Alpha, the cost at the end of the first year is $1,000,000 and $100,000 each year thereafter. There are no benefits in the first two years but are constant at $300,000 per year thereafter. For Project Beta, the cost at the end of the first year is $1,000,000 and $90,000 each year thereafter. Benefits are constant at $200,000 per year for all years.
Use Excel to answer the following questions in 2-5 sentences each. You have to provide your answers here even if you are attaching a separate Excel file.
1) What is the NPV for Project Alpha? In your answer explain what NPV is, why it’s useful as well as its shortcomings.
2) Does Project Alpha pass the economic efficiency test based on your answer in part 1)? Why? Explain?
3) What is the BCR for Pro Project Alpha? In your answer explain what BCR is, why it’s useful as well as its shortcomings.
4) Does Project Alpha pass the economic efficiency test based on your answer in part 3)? Why? Explain?
5) What is the IRR for Project Alpha? In your answer explain what IRR is, why it’s useful as well as its shortcomings.
6) Does Project Alpha pass the economic efficiency test based on your answer in part 5)? Why? Explain?
7) Are your conclusions about economic efficiency consistent in parts 2), 4), and 6)? Why or why not? Did you expect this?
8) What is the NPV for Project Beta?
9) Does Project Beta pass the economic efficiency test based on your answer in part 8)? Why? Explain?
10)What is the BCR for Project Beta?
11) Does Project Beta pass the economic efficiency test based on your answer in part 10)? Why? Explain?
12)What is the IRR for Project Beta?
13)Does Project Beta pass the economic efficiency test based on your answer in part 12)? Why? Explain?
14)Are your conclusions about economic efficiency consistent in parts 9), 11), and 13)? Why or why not?
15)Which project would you recommend? Why?
16)What if I told you that Project Alpha is a football stadium and Project Beta is a hospital and your jurisdiction currently does not have either? Would your answer change? Why or why not?
17)Instead of implementing either project, if you invested your $1,000,000 today at a 5% interest rate which compounds quarterly, how much money would you have in 10 years?
2. (28 points) It’s that time of the year and you have to calculate your federal taxes. (Lucky for you, there are no state or local income taxes where you live.) You have gathered these data about your finances:
i. Wage income = $45,000
ii. Corporate bond interest income = $800
iii. US Treasury bond interest income = $1000
iv. Tax-exempt Interest income from the bond issued by the State of Georgia = $600
v. Total itemized deductions = $12,000
Use the personal exemptions, standard deductions and rate schedule in this link:https://taxfoundation.org/2017-tax-brackets/
First, suppose you are single:
1) What is your marginal tax rate?
2) What is your tax liability?
3) What is your effective tax rate?
4) How would a $1,000 tax credit change your tax liability and effective tax rate?
Now, suppose you are married and your spouse has no wage or interest income and your joint itemized deductions are still $12,000:
5) What is your joint marginal tax rate?
6) What is your joint tax liability?
7) What is your joint effective tax rate?
8) How would a $1,000 tax credit change your tax liability and effective tax rate?
Now, suppose you are married and your spouse has the exact same income profile as you and your joint itemized deductions are still $12,000:
9) What is your joint marginal tax rate?
10)What is your joint tax liability?
11) What is your joint effective tax rate?
12)How would a $1,000 tax credit change your tax liability and effective tax rate?
13)Do you think this is fair? Does this make you want to get married or stay single?
14)Is this tax system progressive, regressive, or proportional? Why?
3. (14 points) A small town has a property tax base with an appraised value of $400,000 of taxable real property, $80,000 of taxable personal property, and $50,000 of non-taxable property. The assessment ratio is 40% for this local government. The homestead exemption is relatively small but reduces the assessed value by $50,000. The town estimates that the budgetary needs at $120,000.
1) What statutory tax rate would allow the town to meet its budgetary obligations?
2) Given the statutory tax rate you found in part 1), what is the effective property tax rate for this town?
3) You are contemplating about moving to this town. The property you are interested in buying has a market value of $150,000. How much would you pay in property taxes to this school district?
4) How would your answer in part 3) change if you discovered that you could get a $5,000 exemption against the assessed value of your new home?
5) Would your property tax bill affect your decision to move to this town? Why or why not? What other information might be helpful in making your decision?
6) Suppose that the property tax rate you found in part 1) increases by 3%. What is the new rate and your new tax bill?
7) Suppose that the property tax rate you found in part 1) increases by $1 per $100 of assessed value. What is the new rate and your new tax bill?
4. (12 points) Suppose you are in the 25% federal income tax bracket and want to invest $100,000 in an interest-earning asset.
1) Which asset would you invest in and why:
i. AAA rated (highest rating) municipal bond with a 4% yield or
ii. AAA rated (highest rating) corporate bond with a 5.4% yield
iii. U.S. treasuries with a 5.5% yield? Explain.
2) Suppose you get a large pay raise and your marginal income tax rate is now 39.6%. How would your answer change in part 1)?
3) What do you conclude about the value of tax-exemption for different income groups?
4) Do you think this type of tax preference is fair?
5) Would you answer change if the corporate bond rating declined to below investment grade? Why?
6) Would your answer change if the municipal bond rating declined to below investment grade? Why?
5. (6 points) Explain the role of financial statement analysis, Balance Sheet and Income Statement, and financial ratios in evaluating financial health of a jurisdiction or an organization in 1-2 paragraphs.
Problem-Set-4….docx
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1 10pts Explain The Benefits From Asset Securitization As Outlined In Riddiough 2011 2715315
/in Uncategorized /by developer1. (10pts)Explain the benefits from asset securitization as outlined in Riddiough (2011). For full credit, you’ll need more detail than was provided in my bullet
2. (10pts)In the following example assume that the MBS has total collateral of $1,000, the CDO collateral is $150 worth of MBS mezzanine bonds, and the MBS collateral has suffered a 7% default loss. Fill in the principal losses for each of the MBS and CDO tranches below (show calculations on a separate page.
MBS
Tranche
Attachment
Detachment
Principal Loss
Senior (AAA)
20%
100%
Mezzanine
3%
20%
Residual
0%
3%
CDO
Attachment
Detachment
Principal Loss
Senior (AAA)
30%
100%
Mezzanine
5%
30%
Residual
0%
5%
3. (20pts) In July 2008, KKR announced a revision to its plans to go public. The plan called for KKR to acquire its subsidiary KKR Private Equity Investors (“KPE”) that currently was publicly traded on Euronext. KKR would then reorganize the entire firm as a public corporation and list on the NYSE.[1] At closing, the new KKR would have 975,708,333 shares.
The plan called for KPE’s current shareholders to exchange their shares for 21% of the new firm’s common equity, or 204,898,750 shares. KKR’s current principals would retain the remaining (770,809,583) shares. To demonstrate their commitment to the long-term performance of KKR, the principals also proposed to grant Contingent Value Interests (“CVIs”) to KPE shareholders that would transfer up to an additional 6% of the new firm’s shares to KPE shareholders depending on the firm’s share price three years from closing. The relevant terms of the CVI (per KPE share turned in) are as follows:
If on the 3rd anniversary of the closing the new firm’s shares trade at or above $22.25 per share, the CVIs granted to the KPE shareholders would expire worthless.[2]
If the shares trade at or below $17.31 per share, KKR’s principals would transfer an additional 6% of the firm’s market value to the CVI shareholders.
At any price between $17.31 and $22.25 per share, the principals would transfer an additional percentage share of the firm’s market value such that each KPE shareholder would receive the difference between $22.25 and the firm’s share price.
1. (2pt) Assuming that KPE shareholders retain their initial KKR share grant and the CVIs attached to that grant, what is the maximum number of shares held after three years by KPE shareholders?
2. (2pt) What is the total payoff for a KPE shareholder who is granted one share of KKR stock and one unit of the CVI at closing if the KKR share price is $17.31 after three years?
3. (2pt) What is the total payoff for this KPE shareholder if the share price is $22.25 after three years?
4. (2pt) What is the total payoff for this KPE shareholder if the share price is $24.75 after three years?
5. (4pts) Draw and label the payoff diagram for a KPE shareholder who is granted one share of KKR stock and one unit of the CVI at closing. (see last page for graph template)
6. (3pts) On a separate graph, draw and label the payoff diagram for one unit of the CVI. (see last page for graph template)
7. (5pts) What combination of options, stock, and/or risk-free bonds would replicate the payoff from one unit of the CVI?
4. (10pts)Compare and contrast bookbuilding with Hambrecht’s Dutch auction for IPOs. Your response should include discussion of the fundamental incentive distortion they aim to resolve, how they go about doing so, and their relative strengths and weaknesses.
5. (5pts) Suppose “dirty” auctions became the norm for IPOs. What is a dirty auction and why might it be inferior to bookbuilding? You may wish to tie your response to your response to the preceding question.
6. (15pts)In what sense did Rural Metro’s board breach its fiduciary duty to shareholders? How did RBC “aid and abet” the Board’s breach of fiduciary duty? A strong response to these questions will evidence a good understanding of the economic tradeoffs and incentive conflicts facing sell-side boards and bankers as well as the legal standards for behavior.
7. (5pts)According to Holmstrom (2015), what is the primary purpose of the money markets and how is that purpose served by “over-collateralized” debt?
8. (10pts)Explain why repurchase agreements fit Holmstrom’s notion of over-collateralized debt and why repos were at the core of the 2008 financial crisis. Your response should evidence understanding of how repo financing contributed to a liquidity crisis that effectively led to a run on the shadow banking system.
9. (15pts) Several boutique investment banks already have gone public and Parella Weinberg Partners (PWP) has considered this option. Given that the founders of most of these firms have spoken of the benefits of being narrowly focused private partnerships, why would they want to go public? Your response should include a critical review of the costs and benefits from operating as a partnership, the tradeoffs facing a boutique that is considering going public, and should connect these ideas with PWP’s thoughts on organizational structure and culture.
[1] KPE was essentially a publicly-traded mutual fund that enabled unitholders (shareholders) to participatein some of KKR’s private equity investments.
[2]The payoff actually depended on the 30-day average price at the end of year three but we will ignore that for the purposes of this problem.
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1 2 Pt The Aptly Named Average Hotel Has 100 Rooms Each Belonging To One Of 100 Gues 2774497
/in Uncategorized /by developer1.(2 pt.)The aptly-named Average Hotel has 100 rooms, each belonging to one of 100 guests. After an evening soiree, all of the guests (not thinking straight) randomly select a room to sleep in for that night. Multiple guests might end up in the same room.
(a) (1 pt.) What is the expected number of guests that end up returning to their own hotel room?
[We are expecting: A number, and please show your work.]
(b) (1 pt.) What is the expected number of guests that end up in a room with exactly one other person? (Hint: you may find it easier to count by rooms instead of guests.)
[We are expecting a mathematical expression like(6)(8)or a number like48, and please show your work.]
2.(3 pt.)LetUkbe the universe of all strings consisting ofknumeric digits. (0000,0123, and9898are part of universeU4butb000,012,9!9!are not.) Letuidenote theithdigit of a stringu?Ukwhere 0=i
LetHkbe a family ofkhash functions mapping universeUkto values{0,1,2, . . . ,9}whereh0?Hk hashes all strings according to their first digit. (For all stringsuwhereu0= 0,h0(u) = 0; for all strings uwhereu0= 1,h0(u) = 1; for all stringsuwhereu0= 9,h0(u) = 9.) Likewise,h1?Hkhashes all strings according to their second digit. Generally, for all stringsu?Ukwhereui=x,hi(u) =xfor 0=i
(a) (1 pt.) What is an example of a maximally-sized subsetU3such thatH3is universal for the subset?
[We are expecting: An example subset.]
(b) (2 pt.) WouldHkbe a good family of hash functions (where “good” is defined as universal) to useforUkfork=3?
[We are expecting: A short explanation (2-3 sentences) that answers the question.]
3.(Plagiarism detection) (5 pt.)Hash functions are extremely good at what they do. Unsurprisingly, there are many fancier data structures that can be built on top of them. In this problem we will motivate and explore the idea of a “Bloom Filter,” which is one example of a fancier structure built on top of hash functions.
Suppose you are hired by someone to make a plagiarism detection software for internal use so as to avoid any potentially embarrassing allegations of plagiarism. Specifically, your goal is to make a lightweight (i.e. fast, and relatively low-memory) piece of software that will take a sentence and output one of the following messages: 1) “potentially problematic, please rewrite”, or 2) “fresh like an ocean breeze.” Suppose your goal is the following: if the input sentence is something that you have already seen, you output “potentially problematic” (with probability 1), and if the input is something new, you want to output “fresh” with probability at least 0.99 (its alright if you have a few false-alarms).
(a) (1 pt.) First, you decide to use a hash table. You will make a has table that maps a piece of text to a bucket, then scrape the web for all English sentences, and hash each one to your table. Given a new sentence, you will check to see if it hashes to an empty bucket—if so, you will output option “fresh” otherwise you will output “potential plagiarism.” Suppose there are 1 billion unique sentences online. How many buckets will your hash table need to have to have the desired functionality?
[We are expecting: A number (to the nearest order of magnitude) and one to two sentences of justification.]
(b) (2 pt.) You decide that is a little too much space usage, and consider the following approach: you choose 10 hash functions,h1,…,h10that each map sentences to the numbers 1 though 10 billion. You initialize an arrayAof 10 billion bits, initially set to 0. For each sentencesthat you encounter, you computeh1(s),h2(s),…,h10(s), and set the corresponding indices ofAto be 1 (namely you setA[h1(s)]?1, A[h2(s)]?1, . . .). Argue that after processing the 1 billion unique sentences, you expect a (1-1/(10 billion))10 billion˜0.37 fraction of the elements to be 0.
For this part, feel free to assume that thehiare “idealized” hash functions that map each keys to a uniformly random bucket.
[We are expecting: A paragraph with your argument.]
(c) (2 pt.) Now, given a sentences, to check if it might be plagiarized, you compute the 10 hashes of s, and check ifA[h1(s)] =A[h2(s)] =. . .=A[h10(s)] = 1. If so, you output “potential problem,” otherwise you output “fresh.” Prove that ifsis actually in your set of 1 Billion sentences, that you will output “potential problem” with probability 1, and that ifsisnotin your set of 1 Billion sentences, you will output “fresh” with probability˜1-(1-0.37)10˜0.99.
Again, feel free to assume that the hash functions are “idealized,” and that the claim of the previous part holds, namely that after processing the 1 Billion sentences, there are 3.7 billion indices in the arrayAwith value 0.
[We are expecting: Informal mathematical justifications for each of the bounds.]
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1 2 Different Costing Methods A Number Of Costing Methods Are Used By Various Types 2926881
/in Uncategorized /by developer1.2 Different costing methods: A number of costing methods are used by various types of organisations and the industries, in order to ascertain the cost of the products. However, Meeks and Swann (2009) acknowledged that the method to be considered by the business entities depends on the nature of production and the type of output. Different costing methods could be categorised as follows: Job-order costing: According to Bedford et al. (2008), the job order costing method is concerned with the findings about the costs associated with each job or work order. The method is often used by the customer oriented firms like the service organisation as well as the industry.
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1 3 If A Household S Income Falls From R20 000 To R17 000 And Its Consumption Falls 3298373
/in Uncategorized /by developer1.3 If a household’s income falls from R20 000 to R17 000 and its consumption falls from R18 000 to R15 000, then its: a) marginal propensity to consume is –0,67. b) marginal propensity to consume is 0,88. c) marginal propensity to consume is 0,20. d) marginal propensity to save is zero. e) marginal propensity to save is 0,12.
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1 3 3 Also Suppose The Following Values N Suppose The Production Function Is Y A K T 3818971
/in Uncategorized /by developer1/3 /3 Also suppose the following values N Suppose the production function is Y, = A,K t . Kt 50, K+5 60, N, = 100, Nf+5 = 110, Y = 50, Y+5 = 60
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1 3 Proposed Strategies For Improvement In Costing And Pricing System Of The Organis 2958700
/in Uncategorized /by developer1.3 Proposed strategies for improvement in costing and pricing system of the organisation: ASDA can adopt the following techniques to reduce its costs: JIT system of inventory: The JIT approach suggests that an organization needs to procure input materials as and when required in the production process. This reduces the inventory level, which further reduces the carrying cost of inventories. Activity based management: Activity based costing technique is used to identify and eliminate non-value adding (NVAs) from the business operations, which further leads to a reduction in operating costs. Consistent monitoring and control: Monitoring and control helps in preventing the deviation of actual costs from the budgeted ones through observation, feedback sharing and corrective measures. Total Quality Management (TQM): TQM is focused on consistently improving business processes which makes production and other business processes more efficient. Increase in output reduces the per unit total cost of production. 2.1 Forecasting of cost and revenues: Accurate forecasting of cost and revenues are essential for the development of sound business strategies. An organization can make forecasts based on historic trends or future probabilities (Agrawal, 2009). However, a combination of both historic study and future probabilities can help in making more accurate predictions. The most common forecasting techniques are mentioned below: ?Delphi technique ?Scenario writing ?Subjective approach ?Time-series forecasting Document Preview:
Order NoEHUK5992Word3000Deadline2015-11-21Allocation Date2015-11-21 01:02:00Order TypeFinance AssignmentAcademic LevelMasterSubjectFinanceOrder DeliveryTopic Managing Financial (Hanan) Admin Remark Please follow the guidelines strictly Do make sure all the points have addressed and cross checked No basic errors such as – grammar, spelling , sentence formation and wrong references will be accepted Downloads
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1 3 If Real Gross Domestic Product Is R350 Billion And Planned Aggregate Expenditure 3298375
/in Uncategorized /by developer1.3 If real gross domestic product is R350 billion and planned aggregate expenditure is R275 billion, then inventories will: a) pile up and output will decrease. b) pile up and output will increase. c) be depleted and output will decrease. d) be depleted and output will increase. e) stay constant, as will output.
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1 3 Research Aims The Aim Of The Research Is To Evaluate The Effectiveness Of Market 2958517
/in Uncategorized /by developer1.3 Research aims: The aim of the research is to evaluate the effectiveness of marketing communications over social networks and its impact on organisational brand image while expanding business globally. The study focuses on the approached undertaken by Starbucks while incorporating the business actions. 1.4 Research objectives: • To identify the social networking factors adopted by the beverage industry to expand its business globally. • To determine the impact of marketing communications over social networks for building brand image and successful market penetration. • To evaluate the effectiveness of the marketing communications approaches of Starbucks for global business expansion. • To recommend suitable marketing communication approaches to Starbucks as its global business expansion. 1.5 Research Questions: • What are the social networking factors adopted by the beverage industry to expand its business globally? • How marketing communications impacts over social networks for enhancing the brand image and successful market penetration? • What are the marketing communication approaches adopted by Starbucks for global business expansion? • What would be the suitable marketing communication approaches to improve the global business expansion policies of Starbucks? Document Preview:
Order NoEHUK5877Word9500Deadline2015-09-03Allocation Date2015-09-02 23:42:34Order TypeDissertation (full)Academic LevelBachelorSubjectMarketingOrder DeliveryTopic MARKETING COMMUNICATIONS OVER SOCIAL NETWORKS AND ITS IMPACT ON ORGANISATIONAL BRAND IMAGE WHILE EXPANDING BUSINESS GLOBALLY: A CASE STUDY OF STARBUCKS Admin Remark lease follow the guidelines strictly Do make sure all the points have addressed and cross checked No basic errors such as – grammar, spelling , sentence formation and wrong references will be Downloads HYPERLINK “http://manage.eduhelpsydney.com/writer/order-download/155e4d741b9e0e” Main File Additional Requirement I need it very good quality and i need it chapter by chapter for feedback. thank you. Files(1) EHUK5774-FinalCopy.docx- Top of Form ×
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1 5 The Demand For Money Arises Out Of The Need To Hold Money As A Medium Of Exchang 3298376
/in Uncategorized /by developer1.5 The ________ demand for money arises out of the need to hold money as a medium of exchange. This demand for money is a function of ________. a) precautionary; interest rates b) transactions; national income c) speculative; interest rates d) speculative; national income e) transactions; interest rates
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1 40 Points You Are Evaluating Two Potential Public Projects To Implement In Your Lo 2420955
/in Uncategorized /by developer1. (40 points) You are evaluating two potential public projects to implement in your local jurisdiction. Both projects have a 10 year time horizon. For Project Alpha, the cost at the end of the first year is $1,000,000 and $100,000 each year thereafter. There are no benefits in the first two years but are constant at $300,000 per year thereafter. For Project Beta, the cost at the end of the first year is $1,000,000 and $90,000 each year thereafter. Benefits are constant at $200,000 per year for all years.
Use Excel to answer the following questions in 2-5 sentences each. You have to provide your answers here even if you are attaching a separate Excel file.
1) What is the NPV for Project Alpha? In your answer explain what NPV is, why it’s useful as well as its shortcomings.
2) Does Project Alpha pass the economic efficiency test based on your answer in part 1)? Why? Explain?
3) What is the BCR for Pro Project Alpha? In your answer explain what BCR is, why it’s useful as well as its shortcomings.
4) Does Project Alpha pass the economic efficiency test based on your answer in part 3)? Why? Explain?
5) What is the IRR for Project Alpha? In your answer explain what IRR is, why it’s useful as well as its shortcomings.
6) Does Project Alpha pass the economic efficiency test based on your answer in part 5)? Why? Explain?
7) Are your conclusions about economic efficiency consistent in parts 2), 4), and 6)? Why or why not? Did you expect this?
8) What is the NPV for Project Beta?
9) Does Project Beta pass the economic efficiency test based on your answer in part 8)? Why? Explain?
10)What is the BCR for Project Beta?
11) Does Project Beta pass the economic efficiency test based on your answer in part 10)? Why? Explain?
12)What is the IRR for Project Beta?
13)Does Project Beta pass the economic efficiency test based on your answer in part 12)? Why? Explain?
14)Are your conclusions about economic efficiency consistent in parts 9), 11), and 13)? Why or why not?
15)Which project would you recommend? Why?
16)What if I told you that Project Alpha is a football stadium and Project Beta is a hospital and your jurisdiction currently does not have either? Would your answer change? Why or why not?
17)Instead of implementing either project, if you invested your $1,000,000 today at a 5% interest rate which compounds quarterly, how much money would you have in 10 years?
2. (28 points) It’s that time of the year and you have to calculate your federal taxes. (Lucky for you, there are no state or local income taxes where you live.) You have gathered these data about your finances:
i. Wage income = $45,000
ii. Corporate bond interest income = $800
iii. US Treasury bond interest income = $1000
iv. Tax-exempt Interest income from the bond issued by the State of Georgia = $600
v. Total itemized deductions = $12,000
Use the personal exemptions, standard deductions and rate schedule in this link:https://taxfoundation.org/2017-tax-brackets/
First, suppose you are single:
1) What is your marginal tax rate?
2) What is your tax liability?
3) What is your effective tax rate?
4) How would a $1,000 tax credit change your tax liability and effective tax rate?
Now, suppose you are married and your spouse has no wage or interest income and your joint itemized deductions are still $12,000:
5) What is your joint marginal tax rate?
6) What is your joint tax liability?
7) What is your joint effective tax rate?
8) How would a $1,000 tax credit change your tax liability and effective tax rate?
Now, suppose you are married and your spouse has the exact same income profile as you and your joint itemized deductions are still $12,000:
9) What is your joint marginal tax rate?
10)What is your joint tax liability?
11) What is your joint effective tax rate?
12)How would a $1,000 tax credit change your tax liability and effective tax rate?
13)Do you think this is fair? Does this make you want to get married or stay single?
14)Is this tax system progressive, regressive, or proportional? Why?
3. (14 points) A small town has a property tax base with an appraised value of $400,000 of taxable real property, $80,000 of taxable personal property, and $50,000 of non-taxable property. The assessment ratio is 40% for this local government. The homestead exemption is relatively small but reduces the assessed value by $50,000. The town estimates that the budgetary needs at $120,000.
1) What statutory tax rate would allow the town to meet its budgetary obligations?
2) Given the statutory tax rate you found in part 1), what is the effective property tax rate for this town?
3) You are contemplating about moving to this town. The property you are interested in buying has a market value of $150,000. How much would you pay in property taxes to this school district?
4) How would your answer in part 3) change if you discovered that you could get a $5,000 exemption against the assessed value of your new home?
5) Would your property tax bill affect your decision to move to this town? Why or why not? What other information might be helpful in making your decision?
6) Suppose that the property tax rate you found in part 1) increases by 3%. What is the new rate and your new tax bill?
7) Suppose that the property tax rate you found in part 1) increases by $1 per $100 of assessed value. What is the new rate and your new tax bill?
4. (12 points) Suppose you are in the 25% federal income tax bracket and want to invest $100,000 in an interest-earning asset.
1) Which asset would you invest in and why:
i. AAA rated (highest rating) municipal bond with a 4% yield or
ii. AAA rated (highest rating) corporate bond with a 5.4% yield
iii. U.S. treasuries with a 5.5% yield? Explain.
2) Suppose you get a large pay raise and your marginal income tax rate is now 39.6%. How would your answer change in part 1)?
3) What do you conclude about the value of tax-exemption for different income groups?
4) Do you think this type of tax preference is fair?
5) Would you answer change if the corporate bond rating declined to below investment grade? Why?
6) Would your answer change if the municipal bond rating declined to below investment grade? Why?
5. (6 points) Explain the role of financial statement analysis, Balance Sheet and Income Statement, and financial ratios in evaluating financial health of a jurisdiction or an organization in 1-2 paragraphs.
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