EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 13, Problem 2QTD
Summary Introduction
To discuss: The association among worth of a company and its capital structure with a corporate income tax and without a corporate income tax.
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If the corporate tax rate is greater than zero, how would taxes affect the firm's cost of capital?
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- How would an increase in corporate taxes tend to affect an average firm’s capitalstructure? What about an increase in the personal tax rate?arrow_forwardUnder what assumptions market value of a company does not depend on its capital structure? Discuss.arrow_forwardWhat factors contribute to the business risk of a company? What is financial risk? How do the various sources of risk affect the optimal capital structure?arrow_forward
- Why would a corporation every distribute income? Why not let stock appreciation be the income?arrow_forwardWhat capital components are typically included when estimating a firm’s corporate cost of capital? Is the corporate cost of capital the same for all firms?arrow_forwardWhat major trends in taxation income sources will have an impact on the firm? What action has the firm taken in resposne to these trends?arrow_forward
- In the extractive industries, businesses may pay dividendsin excess of net income. What is the maximumpermissible? How can this practice be justified?arrow_forwardExplain carefully how taxation (both corporate and personal) influences a firm’s capital structure decision.arrow_forwardTwo considerations that cause a corporation's cost of capital to be different than its investors' required returns are A. corporate taxes and the earned income tax credit. B. individual taxes and dividends. C. corporate taxes and flotation costs. D. individual taxes and corporate taxes.arrow_forward
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