When will a company remeasure deferred tax accounts?
A) when there is a change in the statutory income tax rate
B) when there is a change in the state income tax rate
C) when there is a change in the effective income tax rate
D) There is no reason to remeasure a deferred tax account.
Answer: A
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The marginal cost of capital for TagOn, based on an average asset beta of 2.27 for the industry and assuming that new stock can be issued at $8 per share, is closest to:
Boris Duarte, CFA, covers initial public offerings for Zellweger Analytics, an independent research firm specializing in global small-cap equities. He has been asked to evaluate the upcoming new issue of TagOn, a U.S.-based business intelligence software company. The industry has grown at 26 percent per year for the previous three years. Large companies dominate the market, but sizable “pure-play” companies such as Relevant, Ltd., ABJ, Inc., and Opus Software Pvt. Ltd also compete. Each of these competitors is domiciled in a different country, but they all have shares of stock that trade on the U.S. NASDAQ. The debt ratio of the industry has risen slightly in recent years. Company Sales (in millions) Market Value Equity (in millions) Market Value Debt (in millions) Equity Beta Tax Rate Share Price Relevant Ltd. $752 $3,800 $0.0 1.702 23% $42 ABJ, Inc. $843 $2,150 $6.5 2.800 23% $24 Opus Software Pvt. Ltd. $211 $972 $13.0 3.400 23% $13 Duarte uses the information from the preliminary prospectus for TagOn’s initial offering. The company intends to issue 1 million new shares. In his conversation with the investment bankers for the deal, he concludes the offering price will be between $7 and $12. The current capital structure of TagOn consists of a $2.4 million five-year noncallable bond issue and 1 million common shares. Other information that Duarte has gathered: Currently outstanding bonds $2.4 million five-year bonds, coupon of 12.5 percent, with a market value of $2.156 million Risk-free rate of interest 5.25% Estimated equity risk premium 7% Tax rate 23% A. 20.5%. B. 21.0%. C. 21.5%.
The IRS requested client records from a CPA who does not have possession or control of the records. According to Treasury Circular 230, the CPA must
A. Notify the IRS of the identity of any person who, according to the CPA's belief, could have the records. B. Require the client to submit the records to the IRS or withdraw from the engagement. C. Obtain the records from the client and submit them to the IRS. D. Contact all third parties associated with the records, such as banks and employers, to obtain the requested records for submission to the IRS.