Optimal level of leverage from tax-saving perspective

Assignment Help Financial Management
Reference no: EM13914420

Define EBIT and discuss why the optimal level of leverage from tax-saving perspective is the level at which interest equals EBIT. Does this have connection under-leveraging corporations, both domestically and internationally?

Reference no: EM13914420

Questions Cloud

In an inflationary environment : “In an inflationary environment, it is possible for corporate income to increase more than proportionately to the rate of inflation.” Do you agree or disagree with the above statement? JUSTIFY your position.
Define the three conditions that make up a perfect market : Define the three conditions that make up a perfect market, and then compare and contrast the effects of perfect markets and imperfect markets on value. Can they create or destroy value? Explain.
Requirements engineering and object-oriented analysis : Decide on a sample intersection. Extend the above list of requirements to refine the information given above and ensure that the requirements are complete, clear, precise, consistent, and unambiguous.
Estimates the projects terminal value : A project is expected to generate the following sequence of cash flows over the first five years of its life: Year 0 1 2 3 4 5 CF ($m) -65.00 8.00 8.00 9.00 9.50 10.00 Assume the appropriate discount rate for the project is 10%. Estimates the project..
Optimal level of leverage from tax-saving perspective : Define EBIT and discuss why the optimal level of leverage from tax-saving perspective is the level at which interest equals EBIT. Does this have connection under-leveraging corporations, both domestically and internationally?
Define optimal fraction of debt and growth rate of firm : Define the optimal fraction of debt and the growth rate of a firm. What is the relationship between the two?
Considering proposed project which requires an investment : As a financial manager for a company, you are considering a proposed project which requires an investment of $750,000 in fixed assets. The project has a five-year useful life but is classified as three-year MACRS property for tax purposes. The projec..
Method of accounting is primarily for internal decision : Which method of accounting is more commonly used by external stakeholders? Then, which method of accounting is primarily for internal decision making? Financial Accounting or Managerial Accounting?
What is the net present value of this investment : ESPN currently pays the NFL $1.1 billion per year for eight years for the right to exclusively televise Monday Night Football. What is the net present value of this investment if the parent Disney Company has an opportunity interest rate equal to its..

Reviews

Write a Review

Financial Management Questions & Answers

  Explain two factors that affect the present value of asset

Which is better, a present value of $100 or a future value of $100? Please explain. Define and explain two factors that affect the present value of an asset. In five years, what is the future value of $4,000 if the interest rate is 10% and money is c..

  Tax-related factors considered in evaluating foreign target

Should tax-related factors be considered in evaluating a foreign target? MNCs sometimes measure country risk by assigning weights to factors. The Export-Import Bank of the U.S. offers various programs, including. Spain and South Africa have very diff..

  Lender actually charging on the repayment agreement

Bill Farmer has had some financial problems and cannot pay the $200,000 loan that is due next week (i.e. now). Bill's lender agrees to accept 5 annual payments of $46,000 each for the next 5 years instead, with the first payment due one year from now..

  Annual return mean and standard deviation

Tyler Trucks stock has an annual return mean and standard deviation of 14 percent and 43 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 10 percent and 69 percent, respectively. Your portfo..

  What is the amount of the firms ebit

Advantage First Corporation has sales of $4,059,350; income tax of $409,472; the selling, general and administrative expenses of $246,585; depreciation of $302,729; cost of goods sold of $2,415,280; and interest expense of $103,041. What is the amoun..

  Withdrawn any money from account since initial investment

Martin invested $1,000 six years ago and expected to have $1,500 today. He has not added or withdrawn any money from this account since his initial investment. All interest was reinvested in the account. Martin earned simple interest rather than comp..

  Draw expiry payoff diagram for the trader total portfolio

Draw the expiry payoff diagram for the trader total portfolio. Make sure you annotate the diagram fully and what are the no-arbitrage lower and no-arbitrage upper boundaries for the value of the trader's total portfolio?

  Weight of debt and common equity by the current market value

Compute the weighted-average cost of capital (WACC) for the chosen firm on your spreadsheet. Take this number out to the nearest hundredth of a percent (e.g. 33.33%). There is no preferred stock in the company. Determine the weight of debt and common..

  The current value of each hewitt bond

Hewitt Packing Company has an issue of $1,000 par value bonds with a 11 percent annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risk are currently selling to yield a 12 percent rate of return. The..

  What must be the risk-free rate

Assume both portfolios A and B are well diversified, that E(rA) = 13.6% and E(rB) = 14.4%. If the economy has only one risk factor, and βA = 1 while βB = 1.1, what must be the risk-free rate?

  Interpret the value of price elasticity

If a 3 percent increase in price leads to a 5 percent increase in quantity supplied, then. Moving along a demand curve, the quantity demanded decreases 8 percent when price increases 10 percent. Find the arc price elasticity of demand over the price ..

  What is your net dollar sales projection for this year

Dodge Ball Bearings had sales of 19,000 units at $65 per unit last year. The marketing manager projects a 15 percent increase in unit volume sales this year with a 20 percent price decrease (due to a price reduction by a competitor). Returned merchan..

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