CHAPTER 11: THE COST OF CAPITAL LEARNING GOALS: 1. Understand the key assumptions, the basic concept and the specific sources of capital associated with the cost of capital. 2. Determine the cost of long-term debt and the cost of preferred stock. 3. Calculate the cost of common stock equity and convert it into the cost of retained earnings and the cost of new issues of common stock. 4. Calculate the weighted average cost of capital (WACC) and discuss alternative weighing schemes
imperialism is the basis of much contemporary analysis of the interaction between third world and advanced capitalist countries. Interaction between third world and capitalist countries can lead to corruption. Lenin describes the function of financial capital in generating profits from imperialist colonialism, as the final stage of capitalist development to ensure greater profits. As shown in the documentary, “Stealing Africa: Why Poverty?”. Key issues or problems in Zambia, as shown in the documentary
In this note we discuss the evaluation of investment proposals. Cash Flows: Basic Concepts The cash flows that we will use in our analysis are incremental after-tax cash flows. The incremental-cash-flow rule is that the cash flows relevant in analyzing an investment opportunity are those after-tax cash flows and only those after-tax cash flows directly attributable to the investment. The words incremental,
Week 7 Chapter 6: Investors in the Share Market True/False QUESTIONS 1. Investing in shares of publicly listed corporations should, on average, over time provide a higher return than investing in fixed-interest securities. a. True b. False 2. Investments through a stock exchange are limited to ordinary shares issued by listed corporations. a. True b. False 3. Portfolio theory contends that a diversified share portfolio enables an investor to significantly reduce the portfolio’s exposure to systematic
Tax Research Problem 6-59 Parent Corporation owns 85% of the common stock and 100% of the preferred stock of Subsidiary Corporation. The common stock and preferred stock have adjusted bases of $500,000 and $200,000, respectively, to Parent. Subsidiary adopts a plan of liquidation on July 3 of the current year, when its assets have a $1 million FMV. Liabilities on that date amount to $850,000. On November 9, Subsidiary pays off its creditors and distributes $150,000 to Parent with respect to its
The United States' Tax System and Flat Tax The United States tax system is in complete disarray. Republicans and Democrats agree that the current tax code is complex, unfair, and costly. The income tax system is so complex; the IRS publishes 480 tax forms and 280 forms to explain the 480 forms (Armey 1). The main reason the tax system is so complex is because of the special preferences such as deductions and tax credits. Complexity in the current tax system forces Americans to spend 5.4
is to tax capital gains and dividends as income. This would increase the tax on these items, especially on capital gains considerable. Capital gains is one of the most significant sources of income for the wealthy classes, and the lower tax rate means that they pay proportionally less their share. More important from a budgetary perspective is that this proposal will create significantly more revenue on the personal income side. Investors are not going to abandon the world's strongest capital markets
company operating in a developing country, in the absence of a tax treaty between the two countries may have to pay a withholding tax to the government of the developing country, as well as corporation tax to the United States government (Howard, 2001, p. 259). The purpose of this paper is to examine the merit of three basic systems, which is exemption system, credit system and deduction system. These systems are dealings with the essence of tax relief from international double taxation. A discussion
1 Strategic rationale for the acquisition of Myer Holdings Limited 1.1 Growth motive The main reason for this Mergers & Acquisitions(M&A) activity is the growing scale of Premier Investments Limited (Premier). The target for acquisition is Myer Holdings Limited(Myer). Myer is an important customer for Premier with significant common interest. And the competitor, Woolworths South Africa(Woolworths) has already achieved the David Jones acquisition. Therefore, Premier choose Myer as the target for acquisition
government spending, reduction of income and capital gains marginal tax rates, reduction of government regulation of economy, and controlling of the money in supply so as to reduce inflation. Their basic aims were to lower taxes and create a leaner government. According to Reagan his decision was informed on stimulation of the economy taxes, financed by borrowing. Lowering taxes was aimed at reviving the economy, which in turn would see the increased tax revenues being used to offset the debts incurred