Taxes in any company is important because they are the source of income for the development of the organization. this is also applicable to a state because they finance the projects for example building roads schools and hospitals. Learners are informed by studying business. However, the subject is complex and affects the performance of the learner. Get business assignment help from my homework writers. here is n example of common ques asked.
Suppose XYZ Corporation operates (i) in a perfect capital market (ii) faces 40% namely 0.4 corporate income tax and (iii) has current asset value of $1000. 2 Management expects operating profit (i.e., earnings before interest and taxes) of $200 in the coming year.
a)Calculate total expected income available to the suppliers of capital for the following three capital structures:
Capital Structure 1: 100% equity
Capital Structure 2: 70% equity 30% debt with an annual interest of 10%
Capital Structure 2: 30% equity, 70% debt with an annual interest of 10%.
b) Assuming 10% interest applies to any amount of debt, what is the optimal (namely the one that maximizes total expected income to suppliers of capital) 12 capital structure for this company? What is the resulting maximum expected income?
Hint: fill the following table
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