Optimal level of leverage from tax-saving perspective

Assignment Help Financial Management
Reference no: EM13970884

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

Reference no: EM13970884

Questions Cloud

What does the american political landscape look like : How do we start answering broad questions? We begin by exploration and investigative deconstruction. Examine the list of research questions formulated by the Pew Research Center in the last 10 years: What does the American political landscape look ..
Discuss somersets global supply chain : Discuss Somersets global supply chain and possible remedies for its supply chain problems, including strategic and tactical changes that might improve the company's supply chain performance, reduce system variability, and improve quality and custo..
Compute trikeco deemed : Compute Trikeco's deemed paid foreign tax credit, as well as the residual U.S. tax, if any, on the dividend Trikeco received from Trike1. Assume the U.S. tax rate is 35%.
How sensitivity analysis affects the evaluation process : Explain the use of IRR and cash multiples as alternative valuation metrics, and discuss the drawbacks of those methods. In your answer, include how sensitivity analysis affects the evaluation process.
Optimal level of leverage from tax-saving perspective : Define EBIT and discuss why the optimal level of leverage from a tax-saving perspective is the level at which interest equals EBIT. Does this have a connection with under-leveraging corporations both domestically and internationally?
Asymmetric information have on the optimal level of leverage : What impact does asymmetric information have on the optimal level of leverage? In your answer, be sure to describe the implications of adverse selection and the lemons principle for equity issuance, as well as the empirical implications.
Compare and contrast mature profitable firms : Compare and contrast mature profitable firms with stable cash flows with firms with higher risk (dependencies on economy) with unstable cash flows. What risks do they take in regards to leverage use, tax shields, and trading information between manag..
Considering expanding its production capacity : Hanadi Industries is considering expanding its production capacity by purchasing a new machine. The new machine requires an initial outlay of $500 million. Once the machine is operating, the extra capacity is expected to generate $75 million per year..
When applying the capital asset pricing model : What additional assumptions (to the main three) are important when applying the Capital Asset Pricing Model and what are the underlying strengths and weaknesses of this application? Discuss the reliability of the model and give examples in your expla..

Reviews

Write a Review

Financial Management Questions & Answers

  Negatively impacts their long term capital budgeting.

A frequent criticism of the management of publicly-owned American companies is that they are too short-term oriented, too focused on fast returns, and that this negatively impacts their long term capital budgeting.

  Surcharge what are the difference between heavy life

what are the difference between heavy life surcharge and long life surcharge ? details about legal aspect of carriage

  Implicit costs in measuring firms profitability

Some major companies live and die by EVA. For example, at General Electric, more capital is allotted only to divisions that pass the EVA threshold and divisions that regularly flunk are sold off. It’s a simple, but powerful, approach that looks at a ..

  What are sec financials required to adhere

What are companies registered with the Securities & Exchange Commission (SEC) required to include with their financial reports and what are SEC financials required to adhere to?

  What is the amount of the cash flow to creditors

At the beginning of the year, the long-term debt of a firm was 300 and total debt was 350. At the end of the year, long-term debt was 250 and total debt was 360. The interest paid was 32. What is the amount of the cash flow to creditors?

  What is the companys total federal tax liability

ABC Co., a corporation had gross sales of $500,000 in 2008. Additionally, the company also received $100,000 in dividend income and $50,000 as interest income. The total expenditures of this company for 2008 were $272,000. Suppose the tax rate on tax..

  Do you think us equity markets are cleaner

In light of the Enron, Worldcom, option back dating, government bailouts / nationalizations and Madoff scandals, do you think U.S. equity markets are cleaner and more reliable than stock markets in the rest of the world?

  Analyze the information contained in company balance sheet

Analyze the information contained in the company's Balance Sheet, Income Statement, Statement of Cash flows (Pages 13 - 17); "Notes to the Consolidated Financial Statements" pages 18 - 25 and the "Managements Discussion and Analysis of Financial ..

  Cost of sales without depreciation

Bruto's sales for year 2014 were $74889 thousands of dollars. For that year the cost of sales without depreciation was 78% the value of sales and depreciation was 7.333% the value of sales.

  Mitigated foreign exchange risk through methods

Name a firm that mitigated foreign exchange risk through methods such as currency swaps, currency futures, forward transactions, etc. What method was used and what was the result? If the firm has used a different method, would the result have been th..

  Cash flow associated with the machine purchase

A firm purchases a new machine for $100,000. The machine will be depreciated over 5 years at $20,000 per year. The tax rate is 30%. What is the time 0 cash flow associated with the machine purchase?

  Shares of common stock outstanding

Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate..

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