What are the reasons why the tax savings from corporate borrowing are often smaller than the present

Question:

What are the reasons why the tax savings from corporate borrowing are often smaller than the present value of (borrowing capacity × borrowing rate × tax rate)?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

International Finance Putting Theory Into Practice

ISBN: 978-0691136677

1st edition

Authors: Piet Sercu

See More Books

Question Posted: Aug 07, 2017 09:47 AM

See More Questions

What is the difference between a population and a sample? What are the reasons why a sampling process is so often used in place of a census? Why is it that a population can sometimes be as accurate...
What are the reasons why an FI may choose to hedge selectively its portfolio?
What are the reasons why corporations invest in debt and equity securities?
The two roots of a quadratic equation ax 2 + bx + c = 0 can be obtained using the following formula: b 2 - 4ac is called the discriminant of the quadratic equation. If it is positive, the equation...
A frictionless planar curve is in the shape of a function which has its endpoints at the same height but is otherwise arbitrary. A chain of uniform mass per unit length rests on the curve from end to...
The following is information for the Timhits Cafe: a. Balance per the hank statement dated December 31, 2014, is $50,860. b. Balance of Cash account on the company books as of December 31, 2014, is...
What is a contra-asset? Give an example of one.
Stein Books Inc. sold 1,900 finance textbooks for $250 each to High Tuition University in 2013. These books cost $210 to produce. Stein Books spent $12,200 (selling expense) to convince the...
Margaret, a married taxpayer filing a joint return, engaged in two business activities this year. Business A earned $ 4 0 0 , 0 0 0 of profit. Business B incurred a loss of $ ( 9 9 5 , 0 0 0 ) ....
Create a set of use cases for the accompanying dentist office system, but do not bother to identify the steps within each use case. (Just complete the information at the top of the use case form.)...
Sales and costs are 200 and 100, respectively, for the Tunisian, and 100 and 60 for the Hong Kong branch. The tax rates are 50 percent in Tunisia, and 25 percent in Hong Kong. The parent's home...
Why does a firm often combine, for example, exports, foreign marketing, and licensing-rather than choosing only one of the above methods of operations?
A company claims that its 8-ounce low-fat yogurt cups contain, on average, at most 150 calories per cup. A consumer agency wanted to check whether or not this claim is true. A random sample of 10...
The Assembly Department of the Long - Distance Golf Club Super Driver Company, has the following production and cost data at the end of March, 2 0 2 1 . Production: 1 2 , 6 0 0 units started into...
On a horizontal table, puck A has an initial speed of 1.4 m/s heading south of east, making an angle of 35 with the horizontal, while puck B is heading north. After the collision, puck B is heading...
What are the six Vs of data? The process of data cleansing is what type of data analytics challenge? What is the main difference between qualitative and quantitative data? What is the...
What are some internal controls of student payments A / R ? what type of questionnaire do you ask of student payments accounts receivab the internal control questionnaire for student payments and...
Amount of invoice $ 6 4 0 terms 5 / 1 0 , n / 6 0 invoice date 7 / 9 actual partial payment made $ 4 4 0 date of partial payment 7 / 1 8 amount of payment to be credited? Balance outstanding?
Amnaowns undeveloped land with an adjusted basis of $350,000. She sells the property to George for $405,000. a. What is Amnas realized and recognized gain? b. To what IRC section does the gain on the...
You have accepted the engagement of auditing the financial statements of the C. Reis Company, a small manufacturing firm that has been your auditee for several years. Because you were busy writing...
Some special handling devices can be obtained for $12,000. At the end of 4 years, they can be sold for $600. Compute the depreciation schedule for the devices using the following methods: (a)...
The company treasurer is uncertain which of four depreciation methods the firm should use for office furniture that costs $50,000, and has a zero salvage value at the end of a 10-year-depreciable...
The RX Drug Company has just purchased a capsulation machine for $76,000. The plant engineer estimates the machine has a useful life of 5 years and little or no salvage value . He will use zero...
Shahid Pakistan Limited (SPL) is engaged in the production of three products: J, K and L. Following is the extract from its latest annual management accounts: Description J Products K Total L Units...
John Company produces hats and sells them for $100 each. His cost to produce the hats are: DM 20 per unit DL 30 per unit VMOH 10 per unit FMOH 40,000 Selling expenses are $5 per unit and are all...
John Company produces hats and sells them for $100 each. His cost to produce the hats are: DM 20 per unit DL 30 per unit VMOH 10 per unit FMOH 40,000 Selling expenses are $5 per unit and are all...

What are the reasons why the tax savings from corporate borrowing are often smaller than the present

Question:

Step by Step Answer:

Not all of the tax shield may used if the earnings before interest are not la...View the full answer

International Finance Putting Theory Into Practice

Students also viewed these Accounting questions