Question

Irene is saving for a new car she hopes to purchase either four or six years from now. Irene invests $20.000 in a growth stock that does not pay dividends and expects a 6 percent annual before-tax return (the investment is tax deferred). When she cashes in the investment after either four or six years, she expects the applicable marginal tax rate on long-term capital gains to be 25 percent. (For all requirements, do not round Intermedlate calculations. Round your final answers to nearest whole dollar amount.) a. What will be the value of this investment four and six years from now? Investment Value Four years Six years b. When Irene sells the investment, how much cash will she have after taxes to purchase the new car (four and six years from now)? After-tax cash Four years Six years
Please answers all incomplete questions !

Answer 1

Future value of $ 1 after four years and Six years are:-

(1+ 6%/100)4 and (1+6%/100)6

1.26247696 1.418519112

Initial investment $ 20000 multiply by respective future value years

Answer to question (a)
	Investment value
Four years	25,250
Six years	28,370
Answer to question (b)
	After tax cash
Four years	18,937
Six years	21,278

Four years investment value after four years is 25250 and post tax is 25250 *(1- tax rate) which is (1-.25) = 0.75 and same for the six years

After tax income of Manny send his bill to client in january is same as in december which is $ 22680.

And tax rate at which Dennis is indifferent between the bonds is 25%

Difference in interest rate on municipal bond and taxable bond if (7.40% - 5.55%) = 1.85%

which means he is earning 1.85% extra on taxable bond

So, 1.85% / 7.40% = 25%