Reference no: EM132432882

Problem: Each type of business entity is affected by taxation. However, tax rates vary among the many different types of company structures, such as traditional C corporations, S Corporations, partnerships, and LLC. For example, corporations are generally taxed at higher tax rates than sole proprietors.

For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that (1) the market is not weak form efficient, (2) the market is weak form but not semistrong form efficient, (3) the market is semistrong form but not strong form efficient, and (4) the market is strong form efficient.

a. The stock price has risen steadily each day for the past 30 days.

b. The financial statements for a company were released three days ago, and you believe you've uncovered some anomalies in the company's inventory and cost control reporting techniques that are causing the firm's true liquidity strength to be understated.

c. You observe that the senior management of a company has been buying a lot of the company's stock on the open market over the past week.

List the three assumptions that lie behind the Modigliani-Miller theory in a world without taxes. Are these assumptions reasonable in the real world? Explain.

Respond to the following

• Explain the differences in taxing of four different types of organizations.
• If you were going into business and had a choice of business structures to select from that would minimize your taxes, while yielding the highest profits, which would you choose and why?