Question

In: Finance

Consider a company subject to a corporate tax rate of 0.4. Ifthe company has a...

Consider a company subject to a corporate tax rate of 0.4. If the company has a debt ratio of 0.7, and an unleveraged beta of 0.7, what is the company's leveraged beta?

Solutions

Expert Solution

debt ratio=0.7

debt/asset=0.7

1-debt/asset=1-0.7

equity/asset=0.3

so debt to equity (D/E)=0.7/0.3=2.3333

leveraged beta=0.7*(1+(1-0.4)*2.3333)

=1.68


Related Solutions

Consider a company subject to a corporate tax rate of 0.5. If the company has a...
Consider a company subject to a corporate tax rate of 0.5. If the company has a debt ratio of 0.6, and an unleveraged beta of 0.5, what is the company's leveraged beta?
What is the subject of Corporate Tax? Who has to pay corporate tax? Please provide detailed...
What is the subject of Corporate Tax? Who has to pay corporate tax? Please provide detailed information.
Syntonic Limited is an Australian-based company subject to the classical tax system, with a corporate tax...
Syntonic Limited is an Australian-based company subject to the classical tax system, with a corporate tax rate of 30%. Historically, the company has been successful with its projects and currently generating earnings before interest and taxes (EBIT) of $8 million per year, and this level of earnings is assumed to continue forever. However, due to increased competition in its markets, many of its customers are shifting to new service providers. All of the company’s finance has come from shares issued...
Syntonic Limited is an Australian-based company subject to the classical tax system, with a corporate tax...
Syntonic Limited is an Australian-based company subject to the classical tax system, with a corporate tax rate of 30%. Historically, the company has been successful with its projects and currently generating earnings before interest and taxes (EBIT) of $8 million per year, and this level of earnings is assumed to continue forever. However, due to increased competition in its markets, many of its customers are shifting to new service providers. All of the company’s finance has come from shares issued...
Consider a company that has a tax rate of 29 percent. The company has an asset...
Consider a company that has a tax rate of 29 percent. The company has an asset classified as a 3-year asset for tax purposes yet has a useful life of 5 years. If the asset has an initial cost of $40,744, what is the depreciation tax shield for the second year of the asset’s useful life? Report your answer to the nearest whole dollar (e.g., 123)
A company has $3,000,000 in taxable income. The corporate tax rate is 34%. What is the...
A company has $3,000,000 in taxable income. The corporate tax rate is 34%. What is the company's net income (or after-tax earnings)?
An all-equity firm is subject to a 30% corporate tax rate. Its total market value is...
An all-equity firm is subject to a 30% corporate tax rate. Its total market value is initially $3,500,000. There are 175000 shares outstanding. It announces that it will issue $1 million of bonds at 10% interest and uses the proceeds to buy back common stock (Assume no change in costs of financial distress) a. what will happen to the market value of equity at the announcement of the share repurchase? b. How many shares can the firm buy back with...
Case One (22 pts) Ferengi, Inc. is subject to an applicable corporate tax rate of 21...
Case One (22 pts) Ferengi, Inc. is subject to an applicable corporate tax rate of 21 percent, and the weighted average cost of capital (WACC) of 12.5 percent. There is no specific time constraint on investment project payback requirements. Q1: Ferengi is currently contemplating two capital investment plans. Plan A: the upgrade of an information system with an installed cost of $2,400,000. The upgrade system will be depreciated straight-line to zero over the project’s five-year life, at the end of...
The beta of a corporate bond is 0.4. Currently, the risk free rate of interest is...
The beta of a corporate bond is 0.4. Currently, the risk free rate of interest is 1% and the expected rate of return on the market portfolio is 8%. The bond is anticipates to pay coupons of $80 at the end of the year and it has been anticipated that its price at the end of the year will be $1,020. The current price of thebond is $1,070. i. Calculate the required expected rate of return and the actual rate...
A us corporation is subject to an income tax rate of 35% and has a branch...
A us corporation is subject to an income tax rate of 35% and has a branch in the UK which paid the national corporate tax rate of 30% on its earnings there. The branch generated taxable income from its operations in UK equivalent to $5,000,000. What is the amount of taxes owed to the us government on the income generated in the UK
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT