Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
Suppose Congress changed the lax laws in a way that (1) permitted equipment to be de ciated over a shorter period, (2) lowered corporate tax rates, and (3) reinstated the in ment tax credit. Discuss how each of these changes would affect the relative use of lea: versus conventional debt in the U.S. economy.
To Discuss: The ways in which each transformations would influence the comparative utilization of leasing against conventional debt in Country U's economy.
Introduction: A lease is characterized as an agreement between a lessee and a lessor for the contract of a particular asset for a particular period on payment of determined rents.
The ways in which each transformations would influence the comparative utilization of leasing against conventional debt in Country U's economy are as follows:
- 1) Allowing equipment to be devalued over a lesser period builds the tax shelter assessment of leasing.
- 2) Bringing down corporate tax rates diminishes the tax shelter assessment of leasing; even though, lessened corporate tax rates diminish the tax deductibility of interest and the net impact is uncertain.
- 3) Re-establishing the investment tax credit expands the tax shield assessment of leasing...
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