If a firm's marginal tax rate is increased, and other things are held constant, how would...
If a firm's marginal tax rate is increased, and other things are held constant, how would it impact the cost of debt used to calculate its WACC?
Homework Answers
Solution:
If a firm's marginal tax rate is increased, and other things are held constant, it will result in higher tax savings on interest payments, and decrease the cost of debt used to calculated its WACC.
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If a firm's marginal tax rate is increased, and other things are
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True or false and why? 1. Other things held constant, a decrease in a firm’s marginal tax rate would lower the cost of debt when calculate its WACC. 2. The component costs of capital are market-determined variables in the sense that they are based on investors’ expected returns.
All other inputs constant, if a firm's tax rate decreases and they use debt in their...
All other inputs constant, if a firm's tax rate decreases and they use debt in their capital structure, their WACC will __________. A. increase B. decrease C. stay the same
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Assume that your firm's marginal tax rate is 35% and that your firm has the following...
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Which of the following statements is CORRECT? Of the three methods for estimating the cost of...
Which of the following statements is CORRECT? Of the three methods for estimating the cost of equity from retained earnings identified in the textbook, only the DCF method is widely used in practice. The before-tax cost of debt rather than the after-tax cost should be used as the component cost of debt for purposes of developing a company's WACC. The lower the firm's tax rate, the higher will be its after-tax cost of debt and also its WACC, other things...
8. Other things held constant, which of the following actions would increase the amount of cash...
8. Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet? a. The company increases its days sales outstanding. b. The company increases its inventory turnover rate. c. The company increases its expense. d. The company sees a decrease in accounts payable.
Which of the following statements is correct? Group of answer choices Other things held constant, the...
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What is the market yield on a firm's debt if the marginal tax rate is 25%...
What is the market yield on a firm's debt if the marginal tax rate is 25% and the after-tax cost of debt is 15%? a. 20% b. 15% c. 10% d. 25% e. 30%
If a new law decreases the highest marginal tax rate for all companies from 35% to...
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True or False question The after-tax cost of debt generally increases when a firm's bond rating...
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As a firm takes on more debt, its probability of bankruptcy Other factors held constant, a firm whose earnings are relatively volatile faces a chance of bankruptcy. Therefore, when other factors are held constant, a firm whose earnings are relatively volatile should use debt than a more stable firm. When bankruptcy costs become more important, they the tax benefits of debt. Green Goose Automation Company currently has no debt in its capital structure, but it is considering using some debt...
Which of the following statements is CORRECT? Of the three methods for estimating the cost of equity from retained earnings identified in the textbook, only the DCF method is widely used in practice. The before-tax cost of debt rather than the after-tax cost should be used as the component cost of debt for purposes of developing a company's WACC. The lower the firm's tax rate, the higher will be its after-tax cost of debt and also its WACC, other things...
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