Question

In: Finance

In 2017, Congress enacted a bill that 1) reduced the corporate tax rate from 35% to...

In 2017, Congress enacted a bill that 1) reduced the corporate tax rate from 35% to 21% and 2) allowed the immediate write-off of capital spending. 3) disallowed the expensing of interest paid on debt. Discuss at a high level, how each of these changes will likely affect your valuations. (e.g. stock price, P/E ratio, ROR, WACC).

Solutions

Expert Solution


Related Solutions

In 2017, President Trump and Republicans in Congress cut the corporate tax rate from 35 percent...
In 2017, President Trump and Republicans in Congress cut the corporate tax rate from 35 percent to 21 percent via the Tax Cuts and Jobs Act of 2017 (TCJA).” What are the incentives behind this tax cut, explain?
1.The Tax Cuts and Jobs Act of 2017 reduced the corporate income tax rate to a...
1.The Tax Cuts and Jobs Act of 2017 reduced the corporate income tax rate to a 21% flat rate. True False 2. The Tax Cuts and Jobs Act of 2017 eliminated the child tax credit. True False 3. A taxpayer can deduct pass-through losses on his Form 1040. However, he must pass all these limitations in order to deduct the losses, except the A.basis limitation. B.the limitation on the number of children he has. C .at-risk limitation. D.passive loss limitation.
Mozart Inc.’s $98,000 taxable income for 2017 will be taxed at the 35% corporate tax rate....
Mozart Inc.’s $98,000 taxable income for 2017 will be taxed at the 35% corporate tax rate. For tax purposes, its depreciation expense exceeded the depreciation used for financial reporting purposes by $27,000. Mozart has $45,000 of purchased goodwill on its books; during 2017, the company determined that the goodwill had suffered a $3,000 impairment of value for financial reporting purposes. None of the goodwill impairment is deductible for tax purposes. Mozart purchased a three-year corporate liability insurance policy on July...
Suppose the corporate tax rate is 35%​, and investors pay a tax rate of 15% on...
Suppose the corporate tax rate is 35%​, and investors pay a tax rate of 15% on income from dividends or capital gains and a tax rate of 37.3% on interest income. Your firm decides to add debt so it will pay an additional $20 million in interest each year. It will pay this interest expense by cutting its dividend. a. How much will debt holders receive after paying taxes on the interest they​ earn? b. By how much will the...
A) Relying STRICTLY on our classroom discussion: the US corporate tax rate was recently reduced from...
A) Relying STRICTLY on our classroom discussion: the US corporate tax rate was recently reduced from 35% to 21%. In the near future, would you expect the target (optimal) D/V ratios of US companies to increase or decrease as the result of this change? (2-3 sentences) B) What LEGISLATIVE change (i.e. a law or a regulation), if adopted, would most likely cause the target (optimal) D/V ratios of US companies to move in the OPPOSITE direction compared to the one...
Suppose the corporate tax rate is 35%, and investors pay a personal tax rate of 25%...
Suppose the corporate tax rate is 35%, and investors pay a personal tax rate of 25% on income from dividends or capital gains and a personal tax rate of 32.4% on interest income. Your firm decides to add debt so it will pay an additional $30 million in interest each year. It will pay this interest expense by cutting its dividend. a. How much will debt holders receive after paying taxes on the interest they earn? b. By how much...
The U.S. government has decided to decrease the corporate tax rate from 35% to 20% (for...
The U.S. government has decided to decrease the corporate tax rate from 35% to 20% (for the record, I originally wrote this problem long before this actually happened). You have been tasked with re-estimating the remaining PV of a project’s cash flows. The project will operate for the next 4 years before shutting down. It will produce yearly revenue of $40k with yearly operating costs of $20k. The project utilizes some heavy machinery which has a current book value of...
The U.S. government has decided to decrease the corporate tax rate from 35% to 20% (for...
The U.S. government has decided to decrease the corporate tax rate from 35% to 20% (for the record, I originally wrote this problem long before this actually happened). You have been tasked with re-estimating the remaining PV of a project’s cash flows. The project will operate for the next 4 years before shutting down. It will produce yearly revenue of $40k with yearly operating costs of $20k. The project utilizes some heavy machinery which has a current book value of...
The U.S. government has decided to decrease the corporate tax rate from 35% to 20% (for...
The U.S. government has decided to decrease the corporate tax rate from 35% to 20% (for the record, I originally wrote this problem long before this actually happened). You have been tasked with re-estimating the remaining PV of a project’s cash flows. The project will operate for the next 4 years before shutting down. It will produce yearly revenue of $40k with yearly operating costs of $20k. The project utilizes some heavy machinery which has a current book value of...
Information: 1.taxes Trump: Keep and extend 2017 tax cuts. Tax legislation in 2017 reduced marginal tax...
Information: 1.taxes Trump: Keep and extend 2017 tax cuts. Tax legislation in 2017 reduced marginal tax rates across the board, including reducing the top personal income tax rate from 39.6% to 37%. Increased the standard deduction from $6350 to $12,000 (currently $12,400) Limited deduction of state and local taxes to $10,000 Reduced top marginal corporate tax rate from 35% to 21% Biden: Raise certain tax rates Increase top personal marginal tax rate back to 39.6%, but leave other marginal tax...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT