Abolishing tax-deductibility of interest-payments

Assignment Help Financial Management
Reference no: EM131336590

In the Netherlands the corporate tax rate is 25.5%. Suppose each and every year the EBIT of a firm is X million (X>0) and the constant annual interest-payments equal μ*X million, where 0<μ<1.

Now suppose the Dutch government wants to decrease the corporate tax-rate while simultaneously abolishing tax-deductibility of interest-payments.

For which new corporate tax-rate will this particular firm be indifferent between the combination of tax-deductibility and the old tax-rate (of 25.5%) on the one hand and the new tax-rate on the other hand?

Reference no: EM131336590

Compact fluorescent lamps-break-even cost

Compact fluorescent lamps (CFLs) have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $.35 and lasts

Computer-based order entry system

Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It w

Attention on the timing of cash inflows and outflows

The cash budget focuses our attention on the timing of cash inflows and outflows. But is it realistic, at all, to assume that we know when these flows might occur, five or six

Resources faces a smooth annual demand for cash

Watkins Resources faces a smooth annual demand for cash of $1.65 million, incurs transaction costs of $70 every time the firm sells marketable securities, and can earn 3.2 per

Falling forest products plans on paying dividends

Falling Forest Products LLC will end 2014 with a net profit before tax of $400,000. The company is subject to a 40% federal plus state income tax rate, and has 100,000 shares

Determine the annual payment

Determine the annual payment on a $15,000 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Prepare a loan amortization schedule for

How much money will you have at the end of eight years

You would like to invest for the next 8 years to fund a downpayment for your house in 8 years. You are able to deposit $800 every 3 months with the first deposit occurring 3 m

Consider the role of the IMF in the recent financial crisis

Consider the role of the IMF in the recent financial crisis which began in 2008.Write a one to page essay detailing the role of the IMF in alleviating the financial crisis and


Write a Review

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