Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN: 9781305635937
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 4Q
Summary Introduction
To identify: The effect of change in personal tax rate on the company’s capital structure.
Introduction:
Capital Structure:
Capital structure refers to the securities or debt included in the total capital of the firm. Adequate capital structure is required for the optimum utilization of funds.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
If Congress increased the personal tax rate on interest, dividends, and capital gains butsimultaneously reduced the rate on corporate income, what effect would this have on theaverage company’s capital structure?
If the corporate tax rate is greater than zero, how would taxes affect the firm's cost of capital?
How would an increase in corporate taxes tend to affect an average firm’s capitalstructure? What about an increase in the personal tax rate?
Chapter 13 Solutions
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Ch. 13 - Changes in sales cause changes in profits. Would...Ch. 13 - Would each of the following increase, decrease, or...Ch. 13 - Discuss the following statement: All else equal,...Ch. 13 - Prob. 4QCh. 13 - Which of the following would likely encourage a...Ch. 13 - Prob. 6QCh. 13 - Why is EBIT generally considered independent of...Ch. 13 - Is the debt level that maximizes a firm's expected...Ch. 13 - If a firm goes from zero debt to successively...Ch. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - BREAK-EVEN ANALYSIS A company's fixed operating...Ch. 13 - OPTIMAL CAPITAL STRUCTURE Terrell Trucking Company...Ch. 13 - RISK ANALYSIS a. Given the following information,...Ch. 13 - Prob. 4PCh. 13 - FINANCIAL LEVERAGE EFFECTS Firms HL and LL are...Ch. 13 - Prob. 6PCh. 13 - FINANCIAL LEVERAGE EFFECTS The Neal Company wants...Ch. 13 - HAMADA EQUATION Situational Software Co. (SSC) is...Ch. 13 - RECAPITALIZATION Tartan Industries currently has...Ch. 13 - BREAKEVEN AND OPERATING LEVERAGE a. Given the...Ch. 13 - RECAPITALIZATION Currently, Forever flowers Inc....Ch. 13 - BREAKEVEN AND LEVERAGE Wingler Communications...Ch. 13 - FINANCING ALTERNATIVES The Severn Company plans to...Ch. 13 - WACC AND OPTIMAL CAPITAL STRUCTURE Elliott...Ch. 13 - CAMPUS DELI INC. OPTIMAL CAPITAL STRUCTURE Assume...Ch. 13 - To get an overall picture of each company's...Ch. 13 - Repeat this procedure for the other three...
Knowledge Booster
Similar questions
- Is the corporate tax schedule progressive? Why or why not?arrow_forwardWhat Issue do President Biden’s proposal have on the raise of corporate tax ratearrow_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
- How is a business activity distinguished from an investment activity? why is this distinction important for the purpose of calculating federal income taxes? What types of losses may potentially be characterized as passive losses?arrow_forwardAssuming that taxes are to be raised, which tax increase would be least detrimental to long term economic growth, a GST/HST increase or an increase in income tax? Assume that either of the increases would be revenue neutral, i.e., the federal government would take in the same amount of revenue with either tax that is raised.arrow_forwardHow would each of the following changes tend to affect aggregate payout ratios (that is, the average for all corporations), other things held constant? Explain your answers. a. An increase in the personal income tax rate b. A liberalization of depreciation for federal income tax purposesthat is, faster tax write-offs c. A rise in interest rates d. An increase in corporate profits e. A decline in investment opportunities f. Permission for corporations to deduct dividends for tax purposes as they now do interest charges g. A change in the Tax Code so that both realized and unrealized capital gains in any year were taxed at the same rate as dividendsarrow_forward
- 1.) Which theory of taxation states that without taxes, a government would be paralyzed for lack of power to activate and operate it, resulting in its destruction? a. Lifeblood theory b. Reciprocity Theory c. Symbiotic theory 2.) Which type of tax is already repealed by the CREATE Act? a. Regular Corporate Income Tax b. Minimum Corporate Income Tax c. Improperly Accumulated Earnings Tax d. Percentage Taxarrow_forwardWhy is the personal income tax considered less stable than a consumption tax and how do U.S. corporate income taxes favor debt financing over equity financing for business expansion? In addition to this, what are the common criticisms of California’s Proposition 13?arrow_forward3. Do the wealthiest corporations receive a tax break in terms of a lower tax rate? Explain. 4. What is the cash flow identity? Explain what it says.arrow_forward
- Discuss the reasons why individuals generally prefer capital gains over ordinary gains. Explain why corporate taxpayers might prefer capital gains over ordinary gains.arrow_forwardHow does our tax system influence the use of debt financing by corporations?arrow_forward1. The following defines taxation, except: * a. It is an inherent power of the state. b. It is an executive prerogative. c. It is a process of collecting contributions. d.It is a mode of allocating government costs or burden to the people. 2. It is an economic principle that states that the amount of tax an individual pays should be dependent on the level of burden the tax will create relative to the wealth of the individual. * a. Cost allocation b. Ability to pay c. Benefit received d. Lifeblood doctrinearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning