a.
To explain:
Interest tax shield and vale of tax shield
a.
Explanation of Solution
Interest tax shield is availing tax deduction in tax amount for individual and for corporate as well. It includes all reduction and deduction mentioned in tax laws.
Value of tax shield is the amount of gain by the tax shield in future and can be calculated in present amount known as the value interest tax shield.
b.
To explain:
Adjusted present value (APV) model
b.
Explanation of Solution
Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount.
c.
To explain:
Compressed adjusted present value (CAPV) method
c.
Explanation of Solution
Adjusted present value helps to know the net value of the company. It includes unlevered cost of firm and discounted tax amount. It is called compressed because free cash flows and tax shields are discounted at the same rate.
d.
To explain:
Free cash flows to equity model
d.
Explanation of Solution
Want to see more full solutions like this?
Chapter 21 Solutions
Bundle: Financial Management: Theory and Practice, Loose-leaf Version, 15th + Aplia, 1 term Printed Access Card
- How is the impact of uncertainty reflected in a discounted cash flow (DCF) analysis?a) Debt/equity mixb) Discount ratec) Income tax rated) Interest coverage ratioarrow_forwardis the difference between the gross present value of the benefits of that action and the amount of investment required to achieve those benefits Oa. Net Present Value (NPV) Ob. Economic value added (EVA) OC Internal Rate of Return (IRR) d. Discounted Cash Flowarrow_forwardWhat is calculation of before Tax (Equity) Cash Flow? Please provide example.arrow_forward
- Define capital gains yieldarrow_forwardDefine and give examples of the following: • Loan application • Break-even analysis • Pro-forma income projections • Pro-forma cash flowarrow_forwardDescribe how the following factors affect external capitalrequirements: (1) payout ratio, (2) capital intensity, (3) profitmargin.arrow_forward
- Define each of the following terms: c. Net present value (NPV) method; internal rate of return (IRR) method;profitability index (PI)arrow_forward,Match the following terms with the appropriate definition.Effective yield or interest rateMonetary liabilityCompound interestPresent ValueFuture value of a single amountA.Fixed obligation to pay an amount in cash.B.The rate at which money will actually grow.C.Interest accumulates on interest.D.Current worth of future cash flows.E.The money to which an amount invested will grow over time.arrow_forwardThe equation for M & M Proposition I, with taxes, is best shown as?arrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning