Assume an imputation tax system and show the values for A, B, C and D below....

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Assume an imputation tax system and show the values for A, B, C and D below. Show all workings and attach a minus sign ('-') to the value if it is a cash outflow. (4 marks) Marginal tax rate 45% 19% Corporate level Net Profit Before Tax $4 $4 Corporate tax (30%) Net Profit After Tax Shareholder level Cash dividends Gross-up adjustment A A Grossed-up dividends Personal Tax Franking credit -$1.20-$1.20 $2.80 $2.80 Dividend after taxes i) $2.80 $2.80 payable or refund B C D b) FIN222 Ltd carries $24 million in debt. The market value of debt matches its book value of $24 million. The firm expects to generate $15 million per year in free cash flows after corporate taxes and these free cash flows are expected to grow at 2% per year in perpetuity. Each year, FIN222 Ltd is expected to pay out 70% of its free cash flows as dividends. The cost of debt is 10% before tax and the cost of equity to the firm is 12%. Corporate tax rate is 30%. Assume that all of its shareholders can fully utilise the franking credits. Assume a classical tax system and calculate the market value of equity. (1.5 marks) Assume a classical tax system and calculate the WACC. (3 marks) Assume an imputation tax system and show the values for A, B, C and D below. Show all workings and attach a minus sign ('-') to the value if it is a cash outflow. (4 marks) Marginal tax rate 45% 19% Corporate level Net Profit Before Tax $4 $4 Corporate tax (30%) Net Profit After Tax Shareholder level Cash dividends Gross-up adjustment A A Grossed-up dividends Personal Tax Franking credit -$1.20-$1.20 $2.80 $2.80 Dividend after taxes i) $2.80 $2.80 payable or refund B C D b) FIN222 Ltd carries $24 million in debt. The market value of debt matches its book value of $24 million. The firm expects to generate $15 million per year in free cash flows after corporate taxes and these free cash flows are expected to grow at 2% per year in perpetuity. Each year, FIN222 Ltd is expected to pay out 70% of its free cash flows as dividends. The cost of debt is 10% before tax and the cost of equity to the firm is 12%. Corporate tax rate is 30%. Assume that all of its shareholders can fully utilise the franking credits. Assume a classical tax system and calculate the market value of equity. (1.5 marks) Assume a classical tax system and calculate the WACC. (3 marks)

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The provided image contains information and data regarding a hypothetical company under an imputation tax system Since it seems your question is related to the completion of the table for the values o... View the full answer