Make investor indifferent to firm capital structure decision

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Reference no: EM131915142

1. Provide a rationale for selecting Chevron and Mastercard stocks, indicating the significant economic, financial, and other factors that led you to consider this stock.

2. Gale and Scholz (1994) estimate that increasing the contribution limits for IRAs would have little effect on the overall rates of savings. Why do you think this might be the case? Are there any changes being proposed as part of tax reform relating to IRA’s?

3. Assume the corporate tax rate is 30%, the personal tax rate on interest income is 40%, and that a change in capital structure does not affect financial risk. What personal tax rate for equity income would make an investor indifferent to a firm’s capital structure decisions?

Reference no: EM131915142

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