Suppose Congress enacted new tax law changes that would: (1) permit equipment to be depreciated over a shorter period, (2) lower corporate tax rates, and (3) reinstate the investment tax credit. Discuss how each of these potential changes would affect the relative volume of leasing versus conventional debt in the U.S. economy

Suppose Congress enacted new tax law changes that would: (1) permit equipment to be depreciated over a shorter period, (2) lower corporate tax rates, and (3) reinstate the investment tax credit. Discuss how each of these potential changes would affect the relative volume of leasing versus conventional debt in the U.S. economy

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 7Q

See similar textbooks

Similar questions

Suppose Congress enacted new tax law changes that would: (1) permit equipment to be depreciated over a shorter period, (2) lower corporate tax rates,and (3) reinstate the investment tax credit. Discuss how each of these potential changes would affect the relative volume of leasing versus conventionaldebt in the U.S. economy
Suppose Congress changed the tax laws in a way that (1) permitted equipment to be depreciatedover a shorter period, (2) lowered corporate tax rates, and (3) reinstated the investmenttax credit. Discuss how each of these changes would affect the relative use of leasingversus conventional debt in the U.S. economy.
Assuming that taxes are to be raised, which tax increase would be least detrimental to long term economic growth, a GST/HST increase or an increase in income tax? Assume that either of the increases would be revenue neutral, i.e., the federal government would take in the same amount of revenue with either tax that is raised.
Assume the government introduces a lump-sum tax on each firm within a perfectly competitive industry. Which of the following will be true after the introduction of this tax? a. Consumer prices will increase b. There will be no change in any firm’s level of profits c. A deadweight efficiency loss will occur d. There will be no change in the market quantity of output
If Congress wants to stimulate the economy, explainhow it might alter each of the following: (a) personaland corporate tax rates, (b) depreciation expenseschedules, and (c) the differential between the taxrate on personal income and long-term capitalgains. How would these changes affect corporateprofitability and free cash flow? How would theyaffect investors’ choices regarding which securities to hold in their portfolios? Might any of theseactions affect the general level of interest rates?
Suppose the Australian government has announced tax cuts for the business sector. Using the loanable funds model, explain how this will impact the supply of and demand for loanable funds and the interest rate in Australia.
The government will be decreasingincome taxes. To an entity producingluxury bags, it would: A. Expect lower economic growth and may plan to produce less of these bags.B. Expect higher economic growth and may plan to produce more of these bags.C. Expect lower economic growth and may plan to produce more of these bags.D. Expect higher economic growth and may plan to produce less of these bags.
Which of the following has the greatest effect of reducing tax payable through the acceleration of deductions? a. Writing off any bad debts before the end of the income year. b. Value trading stock at market selling value where the market selling value is higher than the cost or replacement price. c. Ensuring investments are positively geared. d. Value trading stock at market selling value where the market selling value is higher than thecost or replacement price.
d) Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an expected reduction in the corporate tax rate taking place towards the end of an investment.
How is trumps policy affecting you. The Balance. Trumps tax plan and how it affects you: discuss how trumps fiscal policy is affecting you. What is the potential problem with a temporary tax decrease designed to increase aggregate demand if people know that it is temporary.
How should the capital structure weights used to calculate the WACC be determined? Suppose a firm estimates its WACC to be 10%. Should the WACC be used to evaluate all of its potential projects, even if they vary in risk? If not, what might be “reasonable” costs of capital for average-, high-, and low-risk projects? If Congress increased the personal tax rate on interest, dividends, and capital gains but simultaneously reduced the rate on corporate income, what effect would this have on the average company’s capital structure? If a firm goes from zero debt to successively higher levels of debt, why would you expect its stock price to rise first, then hit a peak, and then begin to decline?
How would each of the following changes tend to affect aggregate payoutratios (that is, the average for all corporations), other things held constant?Explain your answers.a. An increase in the personal income tax rateb. A liberalization of depreciation for federal income tax purposes—that is,faster tax write-offs