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What are the effects of a corporate tax on the WACC of a business?
Wiki User
∙ 16y ago
to reduce tax and to increase equity in case of bankruptcy
I'm not sure what the above is trying to say. Weighted Average Cost of Capital has nothing to do with bankruptcy. It is a financial calculation to determine what the actual costs of funds is to the entity...whether that be funds raised by selling stock (equity...hence dividends or earnings share...made after Corp tax is paid), bank debts (interest is a tax deductible expense to the company, so the rate needs to consider this benefit...at it's own tax rate, and if it even is making taxable income), bonds (which have different rates and tax effects), preferred stock...(yet different)....sale leaseback (depreciation becomes a factor)...etc. Hence, tax is a component or consideration in determining the actual interest cost of funds for each type of the debt (or capital) of a compnay...all types of which are used to determine the WACC.
Wiki User
∙ 16y ago
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What is the difference between corporate planning and tax planning?
Corporate planning is planning made for your business while tax planning is minimizing the taxes you pay in a legal manner
I am a small business owner. Is the corporate tax return version of Turbo Tax good for small business owners?
Yes, the TurboTax corporate version is good and also easy to use. It walks you through everything you need to consider as a small business owner.
What type of tax must a business pay on its profits to the federal government and some state and local governments?
corporate tax
Why are corporate tax rates higher than individual tax rates?
Corporate tax rates tend to be lower than individual tax rates.
What is the term for a tax levied on individual and corporate earnings?
Personal income tax or corporate income tax, it's not that hard to figure out
What are the effects of a corporate tax on the Weighted Average Cost of Capital of a business?
Only when interest paid on debt is allowed to be tax deductible that a corporate tax will help pull the WACC down. This is because we used an after-tax rate for cost of debt in calculating WACC. And by using the after-tax rate we are assumming that the government allows companies to use interest paid on debt reduce their income tax obligations, hence creating a tax-shield benefit for adding debt. From Peerawich
What is after tax wacc?
WACC stands for weighted average cost of capital. So after tax means cost of capital after taxes are taken into account.
What is after-tax wacc?
WACC stands for weighted average cost of capital. So after tax means cost of capital after taxes are taken into account.
What is the best corporate tax software?
For business or corporate income tax software solutions that provide business income tax software solution that utilizes best practice work papers with screens
What portion of the WACC calculation is impacted by taxes?
The cost of debt is affected by taxes. The debt portion of the WACC is calculated as (total debt / total invested capital)*expected return on debt*(1 - tax rate). More info: http://en.wikipedia.org/wiki/WACC
What is the difference between corporate planning and tax planning?
Corporate planning is planning made for your business while tax planning is minimizing the taxes you pay in a legal manner
What type of tax must a business pay on its to the federal government and some state and local governments?
corporate tax
I am a small business owner. Is the corporate tax return version of Turbo Tax good for small business owners?
Yes, the TurboTax corporate version is good and also easy to use. It walks you through everything you need to consider as a small business owner.
What are top corporate tax software?
Corporate tax software is a computer program for corporate businesses to file their business taxes without having to use a CPA or accountant. www.corptax.com This is a very simple one to use.
What type of tax must a business pay on its profits to the federal government and some state and local governments?
corporate tax
What type of tax must a business pay on it's profit to the federal government and some state and local governments?
corporate tax
What type of tax must a business pay on it's profits to the federal government and some state and local governments?
corporate tax
