Pre-tax and after-tax cost capital structure

Assignment Help Finance Basics
Reference no: EM133057035

Recall that we are always concerned with after-tax cash flows. Since we are determining the cost of capital and that that measure will be the discount rate appropriate to those cash flows as discussed previously, we need the pretax rate, but more importantly the after-tax rate. Also, interest paid by a corporation is a tax-deductible cost item, and that payments to stockholders by way of dividends are not and that capital gains are capped at 15%. Thus, in determining an after-tax discount rate, we need to distinguish between the pre-tax' and after-tax cost' capital structure. Explain your point

Reference no: EM133057035

Questions Cloud

What will be the revised amount of the common share : Assume that on March 1, 2022, Marz issued 12,000 common shares to Havee Fuelz, Inc., What will be the revised amount of the common share
2018 operating cash flow : The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $5 million, and the 2018 balance sheet showed long-term debt of $5.2 million.
Profit from closing out the futures position : A fund manager expects to have funds to invest in three months' time and plans to buy $3 million corporate bonds, currently yielding 7.00% p.a.
Calculate future dollar cost of meeting this sf obligation : Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract
Pre-tax and after-tax cost capital structure : Recall that we are always concerned with after-tax cash flows. Since we are determining the cost of capital and that that measure will be the discount rate
Proper amount of insurance : What is considered the proper amount of insurance so your family will be taken care of if you get sick, injured, or become disabled?
Calculate the initial investment for the replacement : The new machine costs Php24,000 and requires Php2,000 in installation costs. Calculate the initial investment for the replacement
Hedging against the risk of widening credit spreads : If you are concerned about hedging against the risk of widening credit spreads, would you use a Total Return of Credit Default Swap?
Find expense for tax purposes : A firm raises $23,000 of total financing, of which Equity is $11,500 and the rest is Debt. The rate of return to investors for Equity is 9% and for debt is 5%.

Reviews

Write a Review

Finance Basics Questions & Answers

  Explain why some companies that issue bonds engage in

explain why some companies that issue bonds engage in interest rate swaps in financial markets. why do they not simply

  What is the irr of the project

Assume that the required return is 19%. Is the project profitable? What is the IRR of the project?

  What is the probability that at least 10 are defective a mac

A machine makes a product, with 5% of units having faults. In a sample of 20 units, what is the probability that at least 1 is defective? In a sample of 200 units, what is the probability that at least 10 are defective?

  Computing the quarterly compounding

How much must you deposit in an account today so that you have a balance of $ 17,193 at the end of 9 years if interest on the account is 10 % p.a., but with quarterly compounding?

  Compare and contrast the weaknesses and the threats

Assuming that a organization is privately held, wants to expand operations, and is faced with three options for expansion: Going public through an IPO, Acquiring another organization in the same industry, Merging with another organization.

  Find the depreciation charge each year

Doug bought a new car for $40,000 that will be depreciated using the MACRS depreciation scheduale for a 5-year period.

  What is the highest possible volatility of your portfolio

Suppose Ford Motor stock has an expected return of 20% and a volatility of 40%, and Molson Coors Brewing has an expected return of 10% and a volatility of 30%. If the two stocks are uncorrelated,

  Expected return of market portfolio

The risk free rate is 3% per annum. The expected return of market portfolio is 9% per annum. There is a security with current price

  The expected dividend is 250 per share and the growth in

suppose a company issues common stock to the public for 25 a share. the expected dividend is 2.50 per share and the

  Financial institution formed primarily to accept consumer

Base on my reading a thrift institution can be seen as a financial institution formed primarily to accept consumer deposits and make home mortgages

  However companies focus as much on stand-alone risk as on

in theory market risk should be the only relevant risk. however companies focus as much on stand-alone risk as on

  Why the fasb acted to limit such behavior

Explain how discretionary restructuring charges help GE to implement that reporting strategy and why the company would want to pursue it.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd