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Which of the following statements is CORRECT?
A. The maximum federal tax rate on personal income in 2010 was 50%.
B. Since companies can deduct dividends paid but not interest paid, our tax system favors the use of equity financing over debt financing, and this causes companies' debt ratios to be lower than they would be if interest and dividends were both deductible.
C. Interest paid to an individual is counted as income for tax purposes and taxed at the individual's regular tax rate, which in 2010 could go up to 35%, but dividends received were taxed at a maximum rate of 15%.
D. The maximum federal tax rate on corporate income in 2010 was 50%.
E. Corporations obtain capital for use in their operations by borrowing and by raising equity capital, either by selling new common stock or by retaining earnings. The cost of debt capital is the interest paid on the debt, and the cost of the equity is the dividends paid on the stock. Both of these costs are deductible from income when calculating income for tax purposes.
What is the present value of $7,800 received 13 years from now using a 16% interest or discount rate, with interest compounded annually?
Carl Patterson likes investing in stocks that pay dividends. Carl owns 115 shares of a local utility company. The stock pays a regular annual dividend in the amount of $5.25 per share and the company has indicated that the dividend will stay the same..
determine how the costs, revenue, and earnings items would be affected by three possible exchange rate scenarios for the New Zealand dollar.
Assauer is not willing to consider Glovanskia for investment if the country risk rating is below 4.0. Should Assauer consider Glovanskia for investment?
Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1430 per unit; variable costs = $316 per unit; fixed costs = $3931656; quantity = 71456 units. Suppose the company believes all of its estimates are acc..
DarkHawk Co. issued $1000 face bonds with a 6% annual coupon in 2010. The bonds mature in 2040. Exactly 5 years later a company financially similar to DarkHawk, is preparing to issue 30 year $1000 face bonds with a 7% annual coupon. What will be Dark..
When projecting growing cash flows into perpetuity, the estimate should take into account the extra amount required for investment consistent with any projected growth in operating profit. (True, False, Uncertain and explain your response)
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 12% of its $100 par value. Preferred stock of this type currently yields 7%. Assume dividends are paid annually. What is the value of Rolen's preferred stock?
Based on the information below, calculate the weighted average cost of capital. Great corporation has the following situation. Debt. One thousand bonds were issuers ago at a coupon rate. They had 25 year-terms1,00 face value now selling to yield.
Lloyd Corporation's 14% coupon rate, semi annual payment, $1,000 par value bonds, which mature in 30 years, are callable 5 years from today at $1,050. They sell at a price of $1,353.54, and the yield curve is flat. Assume that interest rates are expe..
You’re trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of $17.4 million, which will be depreciated straight-line to zero over its four-year life. If the plant has pr..
The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.8 million and net plant and equipment equals $2.4 million. What is the company's total debt? What is the balance of cur..
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