You had four policy decisions to make
on interest rates, income tax rates, corporate tax rates...
You had four policy decisions to make
on interest rates, income tax rates, corporate tax rates and
government spending and were measured on four outcomes: GDP growth,
unemployment rate, inflation rate, and budget surplus (or deficit).
What is the theoretical or textbook link between each of the
decisions and each of the outcomes? Positive? Negative? or
Neutral?
[You may create a four by four grid
that simply shows the connection, but you should explain the
connections]
GDP growth
Unemployment rate...
3. Suppose the corporate tax rate is 40%, investors pay a tax
rate of 20% on...
3. Suppose the corporate tax rate is 40%, investors pay a tax
rate of 20% on income from dividends or capital gains and a tax
rate of 30% on interest income. Rally, Inc., currently an
all-equity firm, is considering adding permanent debt through a
levered recapitalization (Rally plans to raise 300 million through
debt and payout the proceeds to shareholders). Interest Rally will
be paying each year is expected to be $15 million. Rally will pay
this interest expense by...
Assuming that Amazon’s $6 billion debt is not perpetual, and
that the corporate tax rate is...
Assuming that Amazon’s $6 billion debt is not perpetual, and
that the corporate tax rate is 35%. Given the bonds’ interest
rates, how much value does Amazon’s $6billion debt add to the firm?
In other words, what is the present value of the tax shield
generated by the debt issuance? Note: The $6 billion offering has 5
parts, so you need to compute a present value of tax shield for
each part.
2013 Corporate Tax Rates
If a Corporation's
Taxable Income Is
It Pays This
Amount on the...
2013 Corporate Tax Rates
If a Corporation's
Taxable Income Is
It Pays This
Amount on the
Base of the Bracket
Plus This Percentage
on the Excess over the
Base (Marginal Rate)
Average Tax
Rate at
Top of Bracket
Up to $50,000
$0
15.0%
15.0%
$50,000 - $75,000
7,500
25.0
18.3
$75,000 - $100,000
13,750
34.0
22.3
$100,000 - $335,000
22,250
39.0
34.0
$335,000 - $10,000,000
113,900
34.0
34.0
$10,000,000 - $15,000,000
3,400,000
35.0
34.3
$15,000,000 - $18,333,333
5,150,000
38.0
35.0...
Suppose that instead of plowing back money bank into lucrative ventures, Tencent China’s
management is going...
Suppose that instead of plowing back money bank into lucrative ventures, Tencent China’s
management is going to invest in the capital market where expected return on equity (ROE) is 5%, which is below the return of 6.8% that investors could expect to get from comparable securities. It is expected to pay a dividend next year of RM0.63. Assume the zero growth value of Tencent China is RM13.51.
Required:
(a) Find the sustainable growth rates for the dividends and earnings in...