What is the optimal leverage ratio under new tax regime

Assignment Help Finance Basics
Reference no: EM131977105

Question: In France, the tax on dividends and capital gains is 20%, the corporate tax rate is 32% and the individual tax on interest payments is 50%.

(a) Considering personal and corporate taxes does debt has net tax advantage in France? Assuming that aside from tax there are no other advantages or disadvantage of debt, what is the optimal leverage ratio for companies in France?

(b) Suppose the new government plans to increase the tax on dividends from 20% to 30%? Should the amount of leverage used by French companies increase or decrease? What is the optimal leverage ratio under new tax regime?

Reference no: EM131977105

Questions Cloud

What is the embedded real option in the project : What is the embedded real option in this project? Can the real option be regarded as a call option or a put option? Identify the underlying asset.
Provide three examples of composite objects that are used : Blackboard is a Web-based learning management system used by Strayer for instructions, online interaction, and for educational assessment.
Compute the work done by the weightlifter on the weight : Assume that the weight is initially at rest on the ground, and after the lift it is held at rest above the weightlifter's head, a vertical distance of 2.5 m
What should smiths adjusted gross income be : Smith, an individual, is required to pay Goode yearly alimony. Considering only the foregoing facts, what should Smith's adjusted gross income be for 2017?
What is the optimal leverage ratio under new tax regime : Suppose the new government plans to increase the tax on dividends from 20% to 30%? Should the amount of leverage used by French companies increase or decrease?
Explain why you believe they are composite objects : The system champion: The system champion is the person or group who initiates the project and provides support for it.
Compute the product margins for xtreme and pathfinde product : Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.
What is the forward price on a contract : What is the forward price on a 1-year contract on a portfolio tracking the NASDAQ composite index, assuming the current value of the index is 5850.61.
Magnitude in newtons of the average force applied to ball : The bat is in contact with the ball for 0.003 seconds. What is the magnitude in Newtons of the average force applied to the ball?

Reviews

Write a Review

Finance Basics Questions & Answers

  Define discount rate appropriate for the residual value

Halifax Company has decided to acquire equipment costing $ 1 00,000. Capital cost allowances could be taken at a rate of 20 percent.

  What is the value of this business

Assume that it will take exactly one year to get the first cash flow and each cash flow will occur on the same date ever year. If the current interest rate is 5% per year then what is the value of this business?

  Calculate for alice the total cash value of the annuity

Alice Longtree has decided to invest $400 quarterly for 4 years in an ordinary annuity at 8%. As her financial adviser, calculate for Alice the total cash value of the annuity at the end of year 4.

  What factors would tend to affect the value of a lease

What would cause the rate of return for an investor that purchases real estate and leases it to the corporation to differ from the rate of return earned by the corporation on the incremental investment in owning versus leasing the same property?

  Explain the type of exchange rate movement

A U.S. insurance company invests $1,000,000 in a private placement of British bonds. Each bond pays £300 in interest per year for 20 years.

  Discuss potentially favorable effect of low interest rates

During the financial crisis, U.S. interest rates were extremely low, which enabled businesses to borrow at a low cost.

  Probability that a driver purchases oil

What is the probability that a driver purchases oil, given that he or she purchases gasoline? Round your answer to 2 decimal places.

  Evaluation of pro forma financial statements

Assuming that the executive leadership includes several former accountants, how would the organizational goals influence the preparation and evaluation of pro forma financial statements?

  What is the projected net profits after taxes

If the firm believe that 200000 of the cost of goods sold and 40000 of selling expense are fixed costs, and the interest expense and dividends are not expected.

  Compelling issues human resources professionals

he three most compelling issues human resources professionals should be proactive about in their organizations to support and promote positive employee.

  Substitute tax basis after the exchange

c. What will be Dr. Drillum's substitute tax basis after the exchange?

  Analyze the emergence of mne

This assignment will assess the competency 1. Analyze the emergence of MNE's (multinational entities) within the global marketplace.

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