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Suppose the corporate tax rate is 35%?, and investors pay a tax rate of 20% on income from dividends or capital gains and a tax rate of 38.8% on interest income. Your firm decides to add debt so it will pay an additional $30 million in interest each year. It will pay this interest expense by cutting its dividend.
a. How much will debt holders receive after paying taxes on the interest they? earn?
b. By how much will the firm need to cut its dividend each year to pay this interest? expense?
c. By how much will this cut in the dividend reduce equity? holders' annual? after-tax income?
d. How much less will the government receive in total tax revenues each? year?
e. What is the effective tax advantage of debt τ?*?
Is "Sell in May and Go Away" an example of a pricing anomaly? Briefly explain.- If "Sell in May and Go Away" is a pricing anomaly, how would you be able to use it to earn an above-average return?
The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.6 million and net plant and equipment equals $2.1 million.
Bank A pays 4% interest compounded annually on deposits, while Bank B pays 3.5% compounded daily. a. Based on the EAR (or EFF%), which bank should you use?
Avicorp has a $14.2 million debt outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 94% of par value.
"Your client, Alex, has only two assets in his portfolio: assets A and B. Asset A had a standard deviation of 40%, and Asset B has a standard deviation of 20%. 50% of his portfolio is invested in Asset A, and 50% is invested in Asset B. The correl..
Using scholarly writing and proper APA format, please complete, and then submit the following: 1. The statistical results for each computed correlation above
Aussie Yarn Corporation is a United State producer of woolen yarn made from wool imported from Australia. Raw wool is processed, spun, and finished before being shipped out to knitting and weaving companies.
Baugh & Essary has net income of $149,200, sales of $936,800, a capital intensity ratio of 0.74, and an equity multiplier of 1.5. What is the return on equity?
Cash Flow Statement - Ford Motor Company
Describe how the multiple-baseline design can be used to evaluate the treatment of one behavior in two participants.
The real risk-free rate is 2.05%. Inflation is expected to be 2.4% this year, 3.8% next year, and then 2.7% thereafter. The maturity risk premium is estimated to be 0.05(t - 1)%, where t = number of years to maturity. What is the yield on a 7-year..
Maryland? Light, a U.S. light? manufacturer, is considering an investment in Japan. The dollar cost of equity for Maryland is 11.00 %.
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