Elements of the decision except the corporate tax savings

Assignment Help Financial Management

Reference no: EM131450498

Intel Corp. uses almost no debt and had a total market capitalization of about $20 billion in March 2007. Assume that Intel faces a 35% tax rate on corporate earnings. Ignore all elements of the decision except the corporate tax savings.

1. By how much could Intel managers increase the value of the firm by issuing $10 billion in bonds (which would be rolled over in perpetuity) and simultaneously repurchasing $10 billion in stock? $ ___ billion

2. Suppose the personal tax rate on equity income, as faced by Intel shareholders, is 15% and that the personal tax rate on interest income is 40%. Recalculate the gains to Intel from replacing $10 billion of equity with debt. Round your answer to two decimal places. $ ___ billion

Reference no: EM131450498

Questions Cloud

True statement about the federal reserve : Which of the following is a true statement about the Federal Reserve?

How would you use demographic data to characterize disease : Characteristics of a person or people, geographical location, and era help to better understand the development and pervasiveness of a disease.

Compute the overall value of the firm : Compute the present value of bankruptcy costs for Slash and Burn. Compute the overall value of the firm.

What are the demographics of service users : What are the demographics of service users? What are service users views of the services - what works and what could be improved?

Elements of the decision except the corporate tax savings : Assume that Intel faces a 35% tax rate on corporate earnings. Ignore all elements of the decision except the corporate tax savings.

The present value of bankruptcy costs : Compute the value of Magnum assuming that the present value of bankruptcy costs is $11 million.

Calculate the expected return on equity for mec shareholders : calculate the expected return on equity for MEC shareholders under the current all-equity capital structure.

How prehistoric and ancient artist represented men and women : Your essay will investigate how prehistoric and ancient artists represented men and women. You must use a word processing program to write your essay.

Discuss components of setting quality survey objectives : In creating your survey, you'll want to ensure that the questions are clear, concise and that there is no ambiguity regarding what each question is asking.

User Account

All Pages