Diana and Ryan Workman were married on January 1 of last year. Diana has an eight-year-old son, Jorge, from her previous marriage. Ryan works as a computer programmer at Datafile Inc. (DI) earning a salary of $96,000. Diana is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year. a. Ryan earned a $96,000 salary for the year.
b. Ryan borrowed $12,000 from DI to purchase a car. DI charged him 2 percent interest on the loan, which Ryan paid on December 31, but would have charged Ryan $720 if interest was calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan.
c. Diana received $2,000 in alimony and $4,500 in child support payments from her former husband.
d. Diana won a $900 cash prize at her church-sponsored Bingo game.
e. The Workmans received $500 of interest from corporate bonds and $250 of interest from a municipal bond. Diana owned these bonds before she married Ryan.
f. The couple bought 50 shares of ABC Inc. stock for $40 per share on July 2. The stock was worth $47 a share on December 31. The stock paid a dividend of $1.00 per share on December 1.
g. Diana's father passed away on April 14. She inherited cash of $50,000 and his baseball card collection, valued at $2,000. As beneficiary of her father's life insurance policy, Diana also received $150,000.
h. The couple spent a weekend in Atlantic City in November and came home with gambling winnings of $1,200.
i. Ryan received $400 cash for reaching 10 years of continuous service at DI.
j. Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received $6,000 from his disability insurance. DI paid the premiums for Ryan but they reported the amount of the premiums as compensation to Ryan on his year-end W-2.
k. The drunk driver who hit Ryan in part (j) was required to pay his $2,000 medical costs, $1,500 for the emotional trauma he suffered from the accident, and $5,000 for punitive damages.
l. For meeting his performance goals this year, Ryan was informed on December 27 that he would receive a $5,000 year-end bonus. DI (located in Houston, Texas) mailed Ryan's bonus check from its payroll processing center (Tampa, Florida) on December 28th. Ryan didn't receive the check at his home until January 2.
m. Diana is a 10 percent owner of MNO Inc., a Subchapter S corporation. The company reported ordinary business income for the year of $92,000. Diana acquired the MNO stock last year.
n. Diana's daycare business collected $35,000 in revenues. In addition, customers owed her $3,000 at year-end. During the year, Diana spent $5,500 for supplies, $1,500 for utilities, $15,000 for rent, and $500 for miscellaneous expenses. One customer gave her use of his vacation home for a week (worth $2,500) in exchange for Diana allowing his child to attend the day care center free of charge. Diana accounts for her business activities using the cash method of accounting.
o. Ryan's employer pays the couple's annual health insurance premiums of $5,500 for a qualified plan.

Required:
1. Assuming the Workmans file a joint tax return, determine their gross income.
2. Using your answer in part A, complete page 1 of Form 1040 through line 22 for the Workmans.
3. Assuming the Workmans live in California, a community property state, and that Diana and Ryan file separately, what is Ryan's gross income?
4. Using your answer in part C, complete page 1 of Form 1040 through line 22 for Ryan Workman.

Sabrina gupta, an investment advisor with a major brokerage firm, was examining wal-mart stores, inc. (wal-mart) stock and its valuation. gupta wondered whether to recommend the stock to any of her new clients or to existing clients who did not currently have wal-mart in their portfolios.her key task was to use an intrinsic value approach to price the shares and to then compare the resulting price with the price at which the stock was traded in the market. gupta wanted to use alternative valuation methods and assumptions to produce intrinsic value estimates for wal-mart stock.she was interested in seeing if the alternative methods would point to a consensus regarding the valuation of the stock and to see if the valuations suggested an investment opportunity given the current market price. methods she contemplated to use were: multi-stage growth modelprice earnings multiplemost valuation methods gupta considered required a common set of inputs: future cash flows to wal-mart investorsgrowth rate of future cash flowsdiscount factor or required rate of return by wal-mart investorsgupta gathered data to determine each of the above.gupta thought that dividends to wal-mart shareholders would adequately capture the cash flows to wal-mart shareholders; she also thought that this approach would simplify her task and she would revisit more complex valuation models if she felt the need.gupta thought that capm would provide her a relatively reliable estimate of the required rate of return. capm based required rate of return can be estimated by using a risk free rate, systematic risk of the firm and equity market risk premium. gupta thought that in a valuation exercise that involve long term cash flows, 10-year government bond yield would be an appropriate risk free rate of return estimate. she checked the 10 year note rate and found out that it was about 3.68%. gupta searched for wal-mart beta in bloomberg. bloomberg estimates betas by regressing the s& p 500 returns on the firm returns over the past two years and arrives at a “raw” beta estimate. bloomberg makes an adjustment in raw beta based on some academic research. gupta is confident that bloomberg adjustment is justified and she uses wal-mart beta estimate of 0.66 in her analysis.while gupta is aware of the importance of emrp assumption, she thinks that bloomberg’s historical estimate of 5.05% is a safe assumption. she is aware of the fact that some studies suggest a larger risk premium of approximately six per cent, while others suggest a much lower forward-looking premium of less than four per cent. she is mindful of the arbitrariness of her assumption, and she takes a note to revisit this issue if her valuations produce unreasonable estimates.anticipated dividend growth (g) is often estimated in a variety of ways.first, observed historical dividend growth can be assumed to continue in a perpetual fashion.second, future dividend growth can be estimated on the basis of recent estimates of analysts.gupta noted that the consensus annual wal-mart dividend for fiscal year 2011 was $1.21, and one respected analyst had estimated the expected constant dividend growth (in perpetuity) at approximately 3%.as the chart suggests, both earnings and dividend growth rates are declining but they seem to be higher than the “respected analyst’s” estimates. gupta decides to use several alternative perpetual growth assumptions to see the impact on price. since gupta decided to use variants of dividend discount model (ddm), she checked the anticipated earnings for 2011. analyst’s estimates suggested $4.10 earnings per share. gupta decided to use 10% growth rate from 2011 to 2012 and assumed a steady decline to 3% in 13 years (until 2024) where the perpetual growth rate of 3% resumes. she also assumed that walmart will increase its dividend payout ratio from 30% to 55% from years 2012 to 2024. you are asked to reproduce gupta’s analysis of multi-stage growth model and double check her valuation by using an earnings multiple. you have all the data you need to conduct the multi stage discounted growth model analysis, but you will need to do some research about the multiples valuation.