Referring to problem 13:
a. Compute after-tax return on equity.
b. If the tax rate were 40 percent, what could you infer the value of before-tax income was?
c. Now assume the same before-tax income computed in part b, but a tax rate of 25 percent; recompute after-tax return on equity (using the simplifying assumption that equity remains constant).
d. Assume the taxes in part c were reduced largely as a result of one-time nonrecurring tax credits. Would you expect the stock value to go up substantially as a result of the higher return on equity?

  • CreatedSeptember 21, 2015
  • Files Included
Post your question