Suppose an unlevered firm issues $1000 in debt at a cost of debt of 10%. If the corporate tax rate is 20%, $200 t is the change in the firm's value.
Due to the issue of the corporate tax rate is entitled to Interest Tax Shield assuming Debt issued by the firm is perpetual and ignoring financial distress costs
Change in Value of firm
=Net Effect of Debt Financing
=Present Value of Interest Tax Shield (financial distress costs ignored)
= DebtValue * Cost of Debt * Tax Rate Interest Rate
= $1,000 * 10% * 20% 10%
=$200,
corporate tax rate, also known as corporate income tax or corporate tax, is a direct tax levied on the income or capital of a corporation or similar corporation. Many countries impose such taxes at the national level, and similar taxes may be levied at the state or local level.
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Answer and Explanation:
Perfect competition is a competitive market where there is a very wide number of buyers and sellers who offer the same or similar goods with great product and service information. Furthermore, this sector has free entry and exit
So it is a perfectly competitive market, also it cannot influence the market price also there are price takers
Also the given statement is false as it represents the monopoly market not the perfect competition market
Answer:
False advertising.
Explanation:
The car dealership is showing some advertising that caughts public atention because it offers lower rates and cheap prices for a product that it may not even exist. This is why is called false advertising, because at the time costumer arrives to the dealership asking for the car advertised, they try to sell a different product that is even more expensive.
In my view one of the safest ways to enter markets in foreign countries in strategic alliance with an existing business of that market.This existing business knows about the market Manuel wants to sell its' products in. Furthermore, this would allow Manuel to prepare a strategy accordingly.But, if he forms an alliance with a business that has a bad brand image,it can get tough for Manuel business to even start.Although, I strongly believe that this is one of the safest ways to enter a new market.But,before he takes this step,Manuel must prepare a business plan.
Answer:
Do = $2.00
D1= Do(1+g)1 = $2(1+0.1)1 = $2.20
D2= Do(1+g)2 = $2(1+0.1)2 = $2.42
PHASE 1
V1 = D1/1+ke + D2/(1+ke)2
V1 = 2.20/(1+0.11) + 2.42/(1+0.11)2
V1 = $1.9820 + $1.9641
V1 = $3.9461
PHASE 2
V2 = DN(1+g)/ (Ke-g )(1+k e)n V2 = $2.42(1+0.03)/(0.11-0.03)(1+0.11)2
V2 = $2.4926/$0.0649
V2 = $38.4068
The current stock price is calculated as follows:
Po = V1 + V2
Po = $3.9461 + $38.4068
Po = $42.35
Explanation: This question relates to valuation of shares with 2-phase growth model. The value of shares in the first phase will be determined by discounting the dividend for the 2 years by cost of equity. The dividends for year 1 and year 2 were obtained by subjecting the current dividend paid (Do) to growth rate.
Moreso, the value of shares for the second phase was calculated by considering the last dividend paid(D2) and then subject it to the new growth rate. The adjusted dividend was then capitalized at the appropriate discount rate of the company.
