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Solutions for Corporate Finance, 6th Edition by Jonathan Berk CA$64.70   Add to cart
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Solutions for Corporate Finance, 6th Edition by Jonathan Berk

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  • Course
  • Corporate Finance
  • Institution
  • Corporate Finance

Complete Solutions Manual for Corporate Finance 6e 6th Edition by Jonathan Berk, Peter DeMarzo. ISBN-13: 5026 Excel Solution files are included. PART 1: INTRODUCTION The Corporation and Financial Markets Introduction to Financial Statement Analysis Financial Decision Making and the Law of ...

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Document information

  • July 22, 2023
  • 390
  • 2022/2023
  • Exam (elaborations)
  • Questions & answers

Subjects

  • corporate
  • finance
  • 6th
  • edition
  • jonathan
  • berk
  • solutions
  • manual
  • solution guide
  • end of chapter
  • exercises
  • answers
  • 6e

Written for

  • Corporate Finance
  • Corporate Finance

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Content preview

1 Chapter 1
The Corporation
1-1. What is the most important difference between a corporation and all other organizational forms? A corporation is a legal entity separate from its owners. 1-2. What does the phrase limited liability mean in a corporate context? Owners’ liability is limited to the amount they invested in the firm. Stockholders are not responsible for any encumbranc es of the firm; in particular, they cannot be required to pay back any debts incurred by the firm. 1-3. Which organizational forms give their owners limited liability? Corporations and limited liability companies give owners limited liability. Limited p artnerships provide limited liability for the limited partners, but not for the general partners. 1-4. What are the main advantages and disadvantages of organizing a firm as a corporation? Advantages: Limited liability, liquidity, infinite life Disadvantages: Double taxation, separation of ownership and control 1-5. Explain the difference between an S c orporation and a C corporation. C corporations must pay corporate income taxes; S corporations do not pay corporate taxes, but must pass through the income to shareholders to whom it is taxable. S corporations are also limited to 100 shareholders and cannot have corporate or foreign stockholders. 1-6. You are a shareholder in a C corporation. The corporation earns $2 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 40% and the personal tax rate on (both dividend and non -dividend) income is 30%. How much is left for you after all taxes are paid? First, the corporation pays the taxes. After taxes, is left to pay dividends. Once the dividend is paid, personal tax must be paid, which leaves . So, after all the taxes are paid, you are left with 84¢. 1-7. Repeat Problem 6 assuming the corporation is an S corporation. An S corporation does not pay corporate income tax. So it distributes $2 to its stockholders. These stockholders must then pay personal income tax on the distribution. So they are left with .$2 (1 0.4) $1.20´- =
$1.20 (1 0.3) $0.84 ´- =
$2 (1 0.3) $1.40´- =

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