Tax and Gearing

 Tax and Gearing Essay

W22Extra: Tax and Gearing: Even more Questions

Multiple Choice

1) Which of the following claims is bogus?

A) Generally speaking, the gain to investors from the tax deductibility of interest payments is called the interest tax shield. B) The interest taxes shield may be the additional volume that a company would have paid out in taxes if it did not have power. C) Since Corporations spend taxes issues profits after interest payments happen to be deducted, interest expenses decrease the amount of corporate tax firms need to pay. D) As Modigliani and Callier made clear in their original job, capital composition matters in perfect capital markets. Hence, if capital structure is not important, then it must stem coming from a market flaw. As Modigliani and Callier made clear within their original operate, capital framework does not matter in perfect capital markets. Thus, if capital structure things, then it must stem via a market flaw. ------------------------------------------------------------------------------ Rosewood Industries offers EBIT of $450 , 000, 000, interest expenditure of $175 million, and a corporate taxes rate of 35%. 2) Rosewood's net gain is nearest to:

A) $450 million

B) $180 million

C) $290 mil

D) $95 million

Net gain = (EBIT - Curiosity expense)(1 -- П„C)

= (450 - 175)(1 -. 35) = $178. 75

3) The total of Rosewood's net income and rates of interest is closest to: A) $270 mil

B) $355 million

C) $290 million

D) $450 million

Net gain + Interest = (EBIT - Interest expense)(1 -- П„C)

= (450 - 175)(1 -. 35) = $178. 75 + $175 = $353. 73

4) If Rosewood got no curiosity expense, the net income can be closest to: A) $405 million

B) $160 , 000, 000

C) $450 million

D) $290 million

Net income sama dengan (EBIT - Interest expense)(1 - П„C) = (450 - 0)(1 -. 35) = $292. 50

5) The amount of Rosewood's interest taxes shield is definitely closest to: A) $115 million

B) $290 mil

C) $175 million

D) $60 mil

Interest taxes shield sama dengan Interest expense(П„C) = 175(. 35) sama dengan $61. twenty-five...


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