The present value of interest tax shield. Introduction: An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation , charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

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Answer 1

Question

Chapter 18, Problem 17P

a)

Summary Introduction

To determine: The present value of interest tax shield.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

b)

Summary Introduction

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

c)

Summary Introduction

To determine: The best estimate of project value.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

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General Finance Question

Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

Answer 2

Question

Chapter 18, Problem 17P

a)

Summary Introduction

To determine: The present value of interest tax shield.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

b)

Summary Introduction

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

c)

Summary Introduction

To determine: The best estimate of project value.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

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Answer 3

Question

Chapter 18, Problem 17P

a)

Summary Introduction

To determine: The present value of interest tax shield.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

b)

Summary Introduction

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

c)

Summary Introduction

To determine: The best estimate of project value.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

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Answer 4

Question

Chapter 18, Problem 17P

a)

Summary Introduction

To determine: The present value of interest tax shield.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

b)

Summary Introduction

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

c)

Summary Introduction

To determine: The best estimate of project value.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

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Answer 5

Chapter 18, Problem 17P

a)

Summary Introduction

To determine: The present value of interest tax shield.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

b)

Summary Introduction

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

c)

Summary Introduction

To determine: The best estimate of project value.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

Answer 6

Chapter 18, Problem 17P

a)

Summary Introduction

To determine: The present value of interest tax shield.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

Answer 7

Chapter 18, Problem 17P

a)

Summary Introduction

To determine: The present value of interest tax shield.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

Answer 8

b)

Summary Introduction

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

Answer 9

b)

Summary Introduction

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

Answer 10

c)

Summary Introduction

To determine: The best estimate of project value.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

Answer 11

c)

Summary Introduction

To determine: The best estimate of project value.

Introduction:

An interest tax shield is a deduction in taxable income for a corporation or an individual achieved through claiming deduction like depreciation, charitable donations, and mortgage interest. Tax shield lowers the overall cost of taxes owned by the individual taxpayer.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 18.1 - What are the three methods we can use to include...Ch. 18.1 - Prob. 2CC Ch. 18.2 - Prob. 1CC Ch. 18.2 - Prob. 2CC Ch. 18.3 - Prob. 1CC Ch. 18.3 - Prob. 2CC Ch. 18.4 - Prob. 1CC Ch. 18.4 - Prob. 2CC Ch. 18.5 - How do we estimate a projects unlevered cost of...Ch. 18.5 - What is the incremental debt associated with a...

To determine: The free cash flow for the project. Introduction: Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.

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Chapter 18 Solutions

To determine: The free cash flow for the project.

Introduction:

Free cash flow to equity helps to measure the availability of cash to equity holders after all debt, reinvestment in the project, and all expenses are paid.