Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an expected reduction in the corporate tax rate taking place towards the end of an investment.
Q: Which of the following statements is CORRECT? O The more depreciation a firm reports, the higher its…
A: Depreciation means reduction in value of fixed assets over the period of time. It is for normal wear…
Q: Please explain whether a change in the company's capital structure is likely to reduce its overall…
A: Weighted average cost of capital WACC gives the firms combined cost of capital, including the…
Q: what type of risk?
A: Factors or risk that affect the entire market is known as Systematic Risk. Changes in interest rate…
Q: Which statement about the cost of capital is incorrect? * A. If a company’s tax rate increases…
A: The weighted average cost of capital (WACC) is the sum of costs of different sources of finance…
Q: Explicit consideration of taxes is a necessary aspect of any complete economic study of an…
A: Explicit consideration of taxes is a necessary aspect of any complete economic study of an…
Q: Is the claim that lower company taxes adding to investments correct or is it debatable given the…
A: The money left after expenditure is savings. Savings are used by the individuals for investment. Not…
Q: If you take corporate taxes and the cost of financial distress are into consideration, the market…
A: The cost of conducting business that a company in financial crisis faces, such as a greater cost of…
Q: Evaluate the effect of gearing on cost of capital and firm value taking into consideration the…
A: Answer
Q: If Congress wants to stimulate the economy, explainhow it might alter each of the following: (a)…
A: (a) If congress wants to stimulate the economy, it must reduce the personal income taxes for the…
Q: In calculating the incremental after-tax cash flows associated with a particular investment, the…
A: Sunk Costs is that cost which was already incurred on the project before starting the Project these…
Q: Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an…
A: Salvage value:- The estimated resale worth of an item at the end of its useful life is known as…
Q: Which one of the following is not an effect of an increase in leverage Managers have fewer…
A: Increases in leverage means introducing more debt into capital structure.
Q: Regarding the trade-off theory, a firm would reach its optimal capital structure if the tax savings…
A: Capital Structure is the break-up of total amount of funds raised by entity to finance its…
Q: Why do companies accelerate depreciation on their tax return but often use slower depreciation…
A: Companies generally use accelerated depreciation on their tax return, as these methods result in a…
Q: The capital investment is one that Select one: a. applies only to investment in fixed assets b. is…
A: Capital investment means having enough money to fund a company's operations. It is an investment to…
Q: In the case of a perfect capital market, according to Modigliani and Miller Proposition I and II,…
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…
Q: All of the following are factors that may complicate capital investment analysis except a.changes in…
A: Capital Investment - It refers to the money invested in the business for the purchase of fixed…
Q: Consumer prices will increase
A: Correct Answer is :- A Consumer price will increase
Q: why would it be wise for a financial manager to learn advanced capital budgeting techniques?
A: Capital budgeting is a technique to evaluate various investment opportunities. Capital budgeting…
Q: A firm is considering the purchase of assets that will increase its fixed operating costs. The firm…
A: Degree of combined leverage = Contribution / Earnings before tax
Q: Suppose all plant and division managers in a firm were paid only a fixed salary with no other…
A: Agency problem of the company is the difference in the growth of company and interest of the…
Q: Based on the CAPM, how would one adjust the corporation’soverall cost of capital to establish the…
A: Investors always want minimum returns based on CAPM for investing their money in the company. It…
Q: Is it feasible for a new company endeavor to be lucrative while still experiencing financial…
A: Meaning of Lucrative Lucrative which simply describes as brings profitability into the business…
Q: Case C In your opinion, would the following factors tend to favor borrowing or leasing as a…
A: Borrowing or leasing is a finance alternative wherein assets can be used in the business without…
Q: Which is CORRECT? O Agency costs rise with the increases in the employee ownerships of that firm O A…
A: The agent is the person that acts on behalf of principal and every action shall be in benefit of…
Q: Barnes plans to use the preceding ratios as the starting point for discussions with SKI’s operating…
A: SKI Industry Current 1.75 2.25 Quick 0.92 1.16 TL/assets 58.76% 50.00%…
Q: Adjusted present value technique is a technique that A) adjusts conventional present value for…
A: Adjusted present value technique is very common method used in the valuation of stock and companies…
Q: In the extractive industries, businesses may pay dividendsin excess of net income. What is the…
A: Dividends: This is the amount of cash distributed to stockholders by a company out its earnings,…
Q: favorable tax status
A: Favorable tax status is an advantage of getting reduced tax rates or taxable income or exemption…
Q: false?
A: Investment refers to the asset which is invested in the business for building the wealth and saving…
Q: Much capital structure theory focusses upon minimising agency costs, taxes, and bankruptcy costs. It…
A: capital structure theory says that for any company or investment there is an optimal mix of debt and…
Q: political risk to a company's bottom line?
A: Introduction: Political risks can be defined as those risks which would be faced by the investors or…
Q: The calculation of a hurdle rate when looking capital expenditures involves looking at what…
A: Generally companies take up new projects only when the project passes the hurdle rate (HR). As the…
Q: Your manager is on the company’s capital investment decision team that is to decide on alternatives…
A: Book value can be referred to as the value at which an asset is recorded in the accounting books.…
Q: Holding other factors constant, an increase in the tax rate on revenue generated by capital will:…
A: Increase in tax rate acts as the addition of tax liability of the business. This tax rate is…
Q: If the present value of a firm’s marginal financial distress costs are less than the present value…
A: Capital Structure refers to arrangement of sources of finance from which capital of firm is finance.…
Q: It has been argued that shareholder wealth maximization is not a realistic normative goal for the…
A: Shareholder wealth maximisation or value maximisation means maximisation of the share's market…
Q: Compared to other firms in the industry, a company that maintains a conservative working capital…
A: Higher ratio of current assets to fixed assets
d) Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an expected reduction in the corporate tax rate taking place towards the end of an investment.
Step by step
Solved in 2 steps
- Which one of the following is a soft benefit? Depreciation tax shield Reduction in the number of items spoiled during processing Enhanced reputation of the company Decreased time to receive and process customers’ paymentsEvaluate the effect of gearing on cost of capital and firm value taking intoconsideration the introduction of gearing or leverage increases firm value due to tax benefits.4. What factors should be considered when estimating a new business' NINV? Is it any different for an asset replacement project. 5. Why is depreciation, a noncash expense, considered when estimating a project's net cash flows? 6. What are the potential tax consequences of selling an old asset in an asset replacement investment decision?
- What are the likely effects of a policy in which a company fails to adjust for difference in risk when estimating the cost of capital for their various projects?Why is the depreciation tax shield a component of analyzing investment decisions? O A. Depreciation causes a cash outflow that is added to determine net income. O B. Though no cash was paid out, depreciation was included on the tax return, which caused the company to pay taxes on the amount of depreciation. O C. Depreciation lowers cash outflows for income taxes paid. O D. Depreciation creates cash flows that do not appear on the income statement.If an investment project will positively affect the cash flows of other products the firm currently sells (increasing the flows), this is cannibalization and therefore should be counted in the investment project’s expected cash flows. tRUE OR FALSE
- Which of the following characteristics would an investor place a greater priority on for a short-term investment than for a long-term investment? Tax considerations Liquidity of the investment How often the investment rate compounds Length of the investment periodPlease explain whether a change in the company's capital structure is likely to reduce its overall WACC, and how would this be achieved?Which of the following statements is true? I. In the payback method, depreciation is added back to net operating income when computing the annual net cash flow. II. When a company is cash poor, a project with a short payback period but a low rate of return may be preferred to a project with a long payback period and a high rate of return. III. A shorter payback period does not necessarily mean that one investment is more desirable than another. Only statement III is true. O All of the statements are true. None of the statements are true. Only statement I is true.
- If a company has over capitalization, rate of earning is: Select one: a. equal with the rate of earning if it has optimal level of capitalization b. lower than the rate of earning if it has optimal level of capitalization c. higher than the rate of earning if it has optimal level of capitalizationHow can managers determine the breakeven point or the output needed to achieve a target operating income? 2) How can managers incorporate income taxes into CVP analysis?Which statement about the cost of capital is incorrect? * A. If a company’s tax rate increases then, all else equal, its WACC will increase. B. A company’s target capital structure affects its WACC. C. WACC calculations is based on the after-tax costs of all individual capital components. D. Flotation costs can increase the WACC.