You have recently been hired as the business manager of a dentaloffice. Your employers, the two dentists that own the practice, areconsidering a number of changes to their practice. Using theinformation youâve learned in this course and generally in yourdegree and the facts provided on the next page, please draft ananswer to each of the questions provided on the next page. Youranswer should be a minimum of three pages in length (though it maybe considerably longer) and should address each of the providedquestions. Please explain your work and any calculations that youcomplete as part of that work. Finally, for all questions butquestion 1, please make the following assumptions: 1. The federalincome tax rate is 39.6%. 2. The C-corporate income tax rate is35%. 3. The Self-Employment tax rate is 15.3%. 4. The SocialSecurity tax rate is 6.2% (employer) and 6.2% (employee). 5. TheMedicare tax rate is 1.45% (employer) and (1.45 (employee). 6. TheMedicare Surtax does apply. 7. The maximum Section 179 amount is$100,000 per year. 50% bonus depreciation is available. If you makeany other assumptions in your case analysis, please notate them andexplain your reasoning. â Currently, the business is organized as apartnership. Each of the dentists takes a $20,000 monthly draw fromthe business as a guaranteed payment. They have a staff dentist whois an employee of the practice who is paid $140,000 per year. Inthe current year, the businessâs profits after payment of theguaranteed payments are expected to be an additional $800,000,which is divided equally between the owners. Currently the businessreports its taxes on the cash basis. The business is located in arural renewal community; however, the business does not currentlycomplete any paperwork relating to the work opportunity tax credit.The business owners are grateful the small community in which theyhave made their business and regularly donate 20% of the businessâsnet profit to local religious and charitable organizations. Thebusiness owners would like to upgrade their X-Ray equipment toexpand the businessâs offerings. They are proposing to spend$400,000 on the new equipment and expect the equipment to generateincremental earnings of $80,000 a year for each of the next 8years. 1. Should the business purchase the new X-Ray equipment?What is the Net Present Value of the X-Ray investment assuming a12% cost of capital? How does depreciation impact the Net PresentValue?
You have recently been hired as the business manager of a dentaloffice. Your employers, the two dentists that own the practice, areconsidering a number of changes to their practice. Using theinformation youâve learned in this course and generally in yourdegree and the facts provided on the next page, please draft ananswer to each of the questions provided on the next page. Youranswer should be a minimum of three pages in length (though it maybe considerably longer) and should address each of the providedquestions. Please explain your work and any calculations that youcomplete as part of that work. Finally, for all questions butquestion 1, please make the following assumptions: 1. The federalincome tax rate is 39.6%. 2. The C-corporate income tax rate is35%. 3. The Self-Employment tax rate is 15.3%. 4. The SocialSecurity tax rate is 6.2% (employer) and 6.2% (employee). 5. TheMedicare tax rate is 1.45% (employer) and (1.45 (employee). 6. TheMedicare Surtax does apply. 7. The maximum Section 179 amount is$100,000 per year. 50% bonus depreciation is available. If you makeany other assumptions in your case analysis, please notate them andexplain your reasoning. â Currently, the business is organized as apartnership. Each of the dentists takes a $20,000 monthly draw fromthe business as a guaranteed payment. They have a staff dentist whois an employee of the practice who is paid $140,000 per year. Inthe current year, the businessâs profits after payment of theguaranteed payments are expected to be an additional $800,000,which is divided equally between the owners. Currently the businessreports its taxes on the cash basis. The business is located in arural renewal community; however, the business does not currentlycomplete any paperwork relating to the work opportunity tax credit.The business owners are grateful the small community in which theyhave made their business and regularly donate 20% of the businessâsnet profit to local religious and charitable organizations. Thebusiness owners would like to upgrade their X-Ray equipment toexpand the businessâs offerings. They are proposing to spend$400,000 on the new equipment and expect the equipment to generateincremental earnings of $80,000 a year for each of the next 8years. 1. Should the business purchase the new X-Ray equipment?What is the Net Present Value of the X-Ray investment assuming a12% cost of capital? How does depreciation impact the Net PresentValue?
