1. Discuss how taxes may affect firm value. Can changes in tax rates affect capital budgeting?...
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1. Discuss how taxes may affect firm value. Can changes in tax rates affect capital budgeting? How does a change in tax rate affect municipal bonds? 2. Discuss the difference between accounting profit measures (EBIT, EBITDA, and Net Income) and FCF. 3. Discuss how recent interest rate increases may affect a firm's value. Sales revenues Value = Operating costs and taxes FCF₁ (1 + WACC)¹ Market interest rates Market risk aversion Required investments in operating capital Free cash flow (FCF) FCF₂ (1 + WACC)² Weighted average cost of capital (WACC) Cost of debt Cost of equity FCF (1 + WACC)* Firm's debt/equity mix Firm's business risk 1. Discuss how taxes may affect firm value. Can changes in tax rates affect capital budgeting? How does a change in tax rate affect municipal bonds? 2. Discuss the difference between accounting profit measures (EBIT, EBITDA, and Net Income) and FCF. 3. Discuss how recent interest rate increases may affect a firm's value. Sales revenues Value = Operating costs and taxes FCF₁ (1 + WACC)¹ Market interest rates Market risk aversion Required investments in operating capital Free cash flow (FCF) FCF₂ (1 + WACC)² Weighted average cost of capital (WACC) Cost of debt Cost of equity FCF (1 + WACC)* Firm's debt/equity mix Firm's business risk
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Taxes can have an impact on business equity in numerous ways Corporation tax ratio A rise in the company tax rate can lower a companys aftertax income causing its equity to fall Conversely lowering th... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
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