New Hope Managed Care Inc. is a for-profit managed care company that serves the

Question

New Hope Managed Care Inc. is a for-profit   managed care company that serves the southwest United
States.  Last year, it reported $1,200,000 in income   from operations, $250,000 in interest income from
bonds   it bought in the previous year, and $60,000 in dividend income from shares in   a large drug company. New   Hope also has $200,000 in surplus funds that it is considering investing in   bonds that pay interest of
$10,000   per year or stock that pays dividends of $9,000 per year.



a.   What is New Hope's tax liability?





b.   What is New Hope's marginal tax rate? Average tax rate?



c.   Should New Hope invest its surplus funds in bonds or stock?



New Hope Managed Care Inc. is a for-profit   managed care company that serves the southwest United
States.  Last year, it reported $1,200,000 in income   from operations, $250,000 in interest income from
bonds   it bought in the previous year, and $60,000 in dividend income from shares in   a large drug company. New   Hope also has $200,000 in surplus funds that it is considering investing in   bonds that pay interest of
$10,000   per year or stock that pays dividends of $9,000 per year.



a.   What is New Hope's tax liability?





b.   What is New Hope's marginal tax rate? Average tax rate?



c.   Should New Hope invest its surplus funds in bonds or stock?

Explanation / Answer

Tax liability= 1200000+250000=1450000

B. Tax rate= 30%

c. he should invest his surplus fund in bond as he gets more from bonds...

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