Interest tax shield and vale of tax shield

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 21, Problem 1Q

a.

Summary Introduction

To explain:

Interest tax shield and vale of tax shield

a.

Expert Solution

Explanation of Solution

Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.

Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.

b.

Summary Introduction

To explain:

Adjusted present value (APV) model

b.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.

c.

Summary Introduction

To explain:

Compressed adjusted present value (CAPV) method

c.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.

d.

Summary Introduction

To explain:

Free cash flows to equity model

d.

Expert Solution

Explanation of Solution

Free cash flow to equity is the amount which is going to pay the shareholders. To calculate FCFE, in FCFE less interest expense add interest tax shield. After this discount the levered cost of equity to get the value of operations in equity. Then add value of non operating asstes to get value of equity.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…

Hello tutor give correct answer

Need assistance urgently by the expert. Fake answers will be rate as unhelpful.

Answer 2

Question

Chapter 21, Problem 1Q

a.

Summary Introduction

To explain:

Interest tax shield and vale of tax shield

a.

Expert Solution

Explanation of Solution

Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.

Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.

b.

Summary Introduction

To explain:

Adjusted present value (APV) model

b.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.

c.

Summary Introduction

To explain:

Compressed adjusted present value (CAPV) method

c.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.

d.

Summary Introduction

To explain:

Free cash flows to equity model

d.

Expert Solution

Explanation of Solution

Free cash flow to equity is the amount which is going to pay the shareholders. To calculate FCFE, in FCFE less interest expense add interest tax shield. After this discount the levered cost of equity to get the value of operations in equity. Then add value of non operating asstes to get value of equity.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 21, Problem 1Q

a.

Summary Introduction

To explain:

Interest tax shield and vale of tax shield

a.

Expert Solution

Explanation of Solution

Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.

Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.

b.

Summary Introduction

To explain:

Adjusted present value (APV) model

b.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.

c.

Summary Introduction

To explain:

Compressed adjusted present value (CAPV) method

c.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.

d.

Summary Introduction

To explain:

Free cash flows to equity model

d.

Expert Solution

Explanation of Solution

Free cash flow to equity is the amount which is going to pay the shareholders. To calculate FCFE, in FCFE less interest expense add interest tax shield. After this discount the levered cost of equity to get the value of operations in equity. Then add value of non operating asstes to get value of equity.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 21, Problem 1Q

a.

Summary Introduction

To explain:

Interest tax shield and vale of tax shield

a.

Expert Solution

Explanation of Solution

Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.

Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.

b.

Summary Introduction

To explain:

Adjusted present value (APV) model

b.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.

c.

Summary Introduction

To explain:

Compressed adjusted present value (CAPV) method

c.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.

d.

Summary Introduction

To explain:

Free cash flows to equity model

d.

Expert Solution

Explanation of Solution

Free cash flow to equity is the amount which is going to pay the shareholders. To calculate FCFE, in FCFE less interest expense add interest tax shield. After this discount the levered cost of equity to get the value of operations in equity. Then add value of non operating asstes to get value of equity.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 21, Problem 1Q

a.

Summary Introduction

To explain:

Interest tax shield and vale of tax shield

a.

Expert Solution

Explanation of Solution

Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.

Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.

b.

Summary Introduction

To explain:

Adjusted present value (APV) model

b.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.

c.

Summary Introduction

To explain:

Compressed adjusted present value (CAPV) method

c.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.

d.

Summary Introduction

To explain:

Free cash flows to equity model

d.

Expert Solution

Explanation of Solution

Free cash flow to equity is the amount which is going to pay the shareholders. To calculate FCFE, in FCFE less interest expense add interest tax shield. After this discount the levered cost of equity to get the value of operations in equity. Then add value of non operating asstes to get value of equity.

Answer 6

Chapter 21, Problem 1Q

a.

Summary Introduction

To explain:

Interest tax shield and vale of tax shield

a.

Expert Solution

Explanation of Solution

Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.

Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.

Answer 7

Chapter 21, Problem 1Q

a.

Summary Introduction

To explain:

Interest tax shield and vale of tax shield

Answer 8

a.

Expert Solution

Explanation of Solution

Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.

Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

Summary Introduction

To explain:

Adjusted present value (APV) model

b.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.

Answer 13

b.

Summary Introduction

To explain:

Adjusted present value (APV) model

Answer 14

b.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.

Answer 15

b.

Expert Solution

Answer 16

b.

Expert Solution

Answer 17

Expert Solution

Answer 18

c.

Summary Introduction

To explain:

Compressed adjusted present value (CAPV) method

c.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.

Answer 19

c.

Summary Introduction

To explain:

Compressed adjusted present value (CAPV) method

Answer 20

c.

Expert Solution

Explanation of Solution

Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.

Answer 21

c.

Expert Solution

Answer 22

c.

Expert Solution

Answer 23

Expert Solution

Answer 24

d.

Summary Introduction

To explain:

Free cash flows to equity model

d.

Expert Solution

Explanation of Solution

Free cash flow to equity is the amount which is going to pay the shareholders. To calculate FCFE, in FCFE less interest expense add interest tax shield. After this discount the levered cost of equity to get the value of operations in equity. Then add value of non operating asstes to get value of equity.

Answer 25

d.

Summary Introduction

To explain:

Free cash flows to equity model

Answer 26

d.

Expert Solution

Explanation of Solution

Free cash flow to equity is the amount which is going to pay the shareholders. To calculate FCFE, in FCFE less interest expense add interest tax shield. After this discount the levered cost of equity to get the value of operations in equity. Then add value of non operating asstes to get value of equity.