Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 15, Problem 2Q
How 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 purposes–that 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 dividends
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Chapter 15 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 15 - Define each of the following terms: a. Optimal...Ch. 15 - How would each of the following changes tend to...Ch. 15 - What is the difference between a stock dividend...Ch. 15 - One position expressed in the financial literature...Ch. 15 - Indicate whether the following statements are true...Ch. 15 - Prob. 1PCh. 15 - Prob. 2PCh. 15 - Dividend Payout
The Wei Corporation expects next...Ch. 15 - Prob. 4PCh. 15 - Prob. 5P
Ch. 15 - Prob. 6PCh. 15 - Stock Split
Suppose you own 2,000 common shares of...Ch. 15 - Stock Split Fauver Enterprises declared a 3-for-1...Ch. 15 - Residual Distribution Policy Harris Company must...Ch. 15 - Prob. 10PCh. 15 - Prob. 11PCh. 15 - Prob. 12PCh. 15 - Integrated Waveguide Technologies (IWT) is a...Ch. 15 - Prob. 2MCCh. 15 - Assume that IWT has completed its IPO and has a...Ch. 15 - Prob. 4MCCh. 15 - Prob. 5MCCh. 15 - Suppose IWT has decided to distribute $50 million,...Ch. 15 - Prob. 7MCCh. 15 - Prob. 8MCCh. 15 - Prob. 9MC
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- Two 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_forwardPlease answerarrow_forwardWhat would be a reason a company would want to understate income? A. to help nudge its stock price higher B. to lower its tax bill C. to show an increase in overall profits D. to increase investor confidencearrow_forward
- If the corporate tax rate is greater than zero, how would taxes affect the firm's cost of capital?arrow_forwardWhich statement about the cost of capital is incorrect? * A. If a company’s tax rate increases then, all else equal, its WACC will increase. B. A company’s target capital structure affects its WACC. C. WACC calculations is based on the after-tax costs of all individual capital components. D. Flotation costs can increase the WACC.arrow_forwardWhich of the following statements is CORRECT? a. WACC calculations should be based on the before-tax costs of all the individual capital components. b. Flotation costs associated with issuing new common stock normally reduce the WACC. c. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing. d. A change in a company's target capital structure cannot affect its WACC. e. If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline.arrow_forward
- 3. 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_forwardHow would rising interest rates, that increase the weighted average cost of capital (WACC) impact business valuations? Would this change if the company being valued was going to receive revenue from the government spending?arrow_forwardTwo of the statements below is more likely to encourage the use of debt in the capital structure, select the correct 2. * An increase in the personal income tax An increase in the corporate tax rate All statements are correct. Decrease in the firm's degree of operating leverage An increase in the value of the firm.arrow_forward
- What does an increase in the tax rate on corporate profits do to a firm’s coverage ratio? increases it decreases it nothingarrow_forwardIf 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?arrow_forwardName some reasons why the taxable income of a corporation is likely not to be the same as its financial statement net income. a Depreciation expense on the tax return is typically greater than depreciation expense for financial statements. b Accounts payable are usually different. c Net assets are usually larger on the tax return. d ales amounts differ because of Internet sales.arrow_forward
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