I have many questions regarding this mock …
First, Q3 asks for a liquidity calculation.
The correction does not take into account the salary and neither the living expenses. It seems to be motivated by the fact that the text states : “Marjorie’s salary of $150,000 covers her current living expenses.”
However, to calculate a required rate of return on Q5, the current salary is assumed to be 150 (maintained at 150K) and her living expenses are 150K. Due to the explicit tax of 40% (-60K) that is taken into account in Q5, it seems that a liquidity need arise (60K) from the missmatch between net salary and living expenses.
Why is this not taken into account in qestion 3?
Also, i do not understand answer to Q4 :
“The Westmeyer shares provide tax deferral benefits because no taxes are to be paid until disposal. In addition, there are tax reduction benefits: No dividends are paid , and taxes on dividends are higher than those on capital gains”
From my point of view, there is no indication in the text that no dividends are paid on Westmeyer shares ( there is only an indication for the lack of dividends for SSE shares. Hence i do not see any tax reduction benefits.
Thanks for any help regarding this mock , i am more confused after reading the correction than before…