ACC 444 Lecture Notes - Lecture 3: Tax Rate, Tax Bracket, Cash Flow

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27 Feb 2020
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Instructions: there will be two mandatory problems on the final exam and 9 other problems, of which you will choose 6 to be graded. The practice exam will give a flavor for the types of questions that can be asked. I will post the formula sheet for the final and practice exam later. I will go over the practice exam on wednesday in class: millennium motors has current pretax annual cash flows of ,000 and is in the 35% tax bracket. The appropriate discount rate for its cash flows is 12%. Suppose the firm issues a ,500 bond and uses these proceeds to pay a one-time special dividend to stockholders: using the perpetuity valuation model, calculate the value of the firm without debt in the capital structure. Assume that the pretax annual cash flows are perpetual: forwards resources company is currently an all-equity firm with a wacc of 14% and a 40 percent marginal tax rate.

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