Loose-Leaf Essentials of Investments
Loose-Leaf Essentials of Investments
10th Edition
ISBN: 9781259604966
Author: Kane, Alex, Marcus Professor, Alan J., Bodie Professor, Zvi
Publisher: McGraw-Hill Education
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Chapter 21, Problem 12PS

Verify that the traditional tax shelter with a progressive tax (Spreadsheet 21 . 7 ) acts as a hedge. Compare the, effect of a decline of 2 % in the ROR to an increase of 2 % in ROR. LO 21 4

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What is the compressed adjusted present value(APV) model, and how does this differ from theModigliani and Miller models? (Hint: think of thediscount rate on the tax shield. What is “compressed” about this model?)
How is the compressed adjusted present value (APV) model different from the Modigliani and Miller models? (Hint: consider the tax shield's discount rate.) What about this model is "condensed"?)
Can you please explain the PV that is used to calculate the present value of tax savings. That is: PV(B26,B22,-B25). I am not sure what figure to use as the PV.
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