Question: Your cousin has just started his MBA and is confused
Your cousin has just started his MBA and is confused. He understands that without taxes, capital structure is irrelevant. He also understands that with taxes, firms should use 100 per-cent debts. However, his professor is saying that with taxes, there are times that the investor will prefer an unlevered firm. How is this possible? Assume that there is no bankruptcy cost, information asymmetry, or agency problems. Assume that there is personal tax.
Relevant QuestionsState the two rules of financial leverage.A firm has a dividend yield of 3.14 percent and a payout ratio of 35.84 percent. If its earnings are $25 million and there are 7 million shares outstanding, what is the price per share?MCC Corporation currently has cash flow from operations of $10 million, capital expenditures of $8 million, and pays a dividend of $2 million (all are perpetuities). The firm has no growth prospects or debt, and shareholders ...A company has announced an increase in its quarterly dividend from $0.25 to $0.33 per share. If an investor who owns 700 shares is in the 20 percent tax bracket, calculate the amount by which the investor’s tax would ...For 2012, Ontario Manufacturing Company provided the following accounting information:a. Which of the above are sources of funds?b. Which of the above are uses of funds?c. What is the overall increase or decrease incash?
Post your question