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Question -
a) Describe the basic Modigliani and Miller proposition regarding capital structure. Explain why this proposition must be adjusted, when allowance is made for company taxes. How does this impact on optimal capital structure? Consider whether personal taxes may also be important. Conclude with a description of the relative advantage formula.
b) Assuming that the company tax rate (Tc) is thirty-five percent, that the personal tax rate on equity income (TpE) is thirty percent, and that the personal tax rate on interest income (Tp) is twenty percent, estimate the relative tax advantage of debt. Briefly consider whether the relative advantage formula can be successfully applied to large numbers of companies and investors.
c) Identify the costs of financial distress. Consider both bankruptcy related costs and the costs associated with distorted decision-taking. Describe how these costs are incurred, and explain how they will impact on company value. Use examples that will demonstrate your points.
Explain Porter's five forces model. What are the four competitive strategies firms can choose from according to Porter's model?
Explain the importance of financial statements in relation to reporting organizational performance, how such financial statements link together, and the information that they provide for managers.
Each student should individually estimate the direct materials and direct labor inputs needed to produce the product or service.
Despite the company's tremendous successes, new challenges faced Cook and his chief managers in 2015. The company had yet to reverse the general decline
Be sure toshow how you arrived at your answer. What other factors mayinfluence the value of a bond?
patricia is researching venues for a restaurant business. she is evaluating three major attributes that she considers
Assume an all-equity firm starts to borrow with 30% debt ratio. If the unlevered beta=1.5, what will be the leveled beta.
the abc company has a cost of equity of 10.1 percent a pre-tax cost of debt of 5.3 percent and a tax rate of 29
"Create a proposal for your expected business idea and convert it into a viable business opportunity" Proposal structure should cover the following items:
Refer to the information above. What is the expected return of a new portfolio that is 60% invested in Portfolio R and 40% in Portfolio S?
What is the holding period return over the past year for Stock A given the following information. It has a Beginning Value of $11.00, Ending Value of $10.00
Assume a pair of Nike athletic shoes costs $95.00 (USD), but since you are a Japanese consumer, you can purchase it for 9,690 Yen. What is the American quote based on this information?
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