If company changes their capital structure by increasing more debts, what are the benefits for government?...
If company changes their capital structure by increasing more debts, what are the benefits for government? Should government encourage more debts or less debts to corporate?
Homework Answers
The goverment will gain from the higher taxes due to gearing effect i.e, increased profits due to leverage/debt (and hence higher taxes) but also the government will lose out on some taxe revenue because of corporations having tax exemption of interest.
The net effect of the two goes in favor of lower tax revenue for the goverment hence the government would encourage less debt
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If company changes their capital structure by increasing more
debts, what are the benefits for government?...
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Question 12 (3 points) When a firm's capital structure changes to the use of more debt...
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A company is considering the plan of a more capital intensive structure. The plan involves the purchase of equipment co...
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If a firm changes its capital structure by decreasing its ratio of debt to equity, does...
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Question 12 (3 points) When a firm's capital structure changes to the use of more debt financing, this action will always reduce the WACC and increase equity investors' returns. True False
QUESTION 17 A cost structure which relies more heavily on fixed costs makes the company more sensitive to changes in sales revenue. less sensitive to changes in sales revenue. either more or less sensitive to changes in sales revenue, depending on other factors. have a lower break-even point.
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A company is considering the plan of a more capital intensive structure. The plan involves the purchase of equipment costing 84,000, which will permit it to reduce its existing labour costs by 20,000 a year for 12 years. The company estimates that will have to spend 2000 every two years repairing the equipment. The equipment may be depreciated for tax purposes by the straight-line method, over a 12-year period. The company tax rate is 30 cents in the euro and...
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