Whether a Cut in Corp Tax Rate be Beneficial Essay

Whether a Cut in Corp Tax Rate be Beneficial Doesn’t everyone want to keep what he/she has earned? It has always been somewhat tradition for Americans to work hard for their money, only to see some of it squandered away come tax time. Wouldn’t a tax cut, for some, be like a divine, heavenly grace? As the year 2001 unfolds and George W. Bush begins his presidency, income tax rates have, in fact, become a concern. President Bush is pushing for an income tax bill that will reduce the tax brackets from 15%, 28%, 31%, 36%, and 39.6% to a new bracket in 2006 of 10%, 15%, 25%, and 33%. A cut in individual income taxes would benefit most Americans and is well deserved. However, there is no plan to cut the corporate tax rates yet. A†¦show more content†¦If the risk is too great and a feeling of uneasiness sets in on Wall Street, investors may begin to sell that firm’s stock, dropping the market price per share and possibly the value of the firm itself. The reaso ning? Simple: if the price of the share decreases, then there is a possibility that when the time came for a favorable risk adjustment, investors would be paying a lower price per share than the firm is really worth. The amount of equity that they would receive from their outstanding shares would decrease. Also, if the tax rates rise and the company has been deemed riskier than before, some insiders may begin to sell their shares of the firm. When this hits the market, it sends a negative signal to investors to sell, which will dump excessive shares onto the market. Conversely, if the degree of risk is not in excessive measures, investors might purchase more shares in hopes that the increased risk will yield a higher rate of return; a classic example of the risk-return trade-off. Along with market performance, a firm may need to adapt its financial activities as well. These activities all relate to the way the firm is organized, in particular, its capital structure. Included in capital structure is the aspect of convertible bonds. These bonds can be converted to a specified amount of common stock. The downside of these convertible stocks and bonds is that they have the potential of diluting the Earnings Per Share (EPS)Show MoreRelatedTimken Case Study Essay4797 Words   |  20 Pagesflow analysis using WACC to calculate the value of Torrington worth with synergies. The value turned out to be more than the estimated minimum value of the target. The final recommendation is to proceed with the acquisition as planed which would be beneficial to the Timken. 1. Introduction Timken was considering expanding and they sought Torrington Company from Ingersoll- Rand as a worthy acquisition. Timken and Torrington share similar business operations and Timken thought with the combined 100Read MoreBuckwold Chapter 11 Solutions10718 Words   |  43 Pagesrather than from the sale of shares at a profit.† Is this statement true? 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