Okay Facebook

Question 1 Answer: 1) Advantages to Shareholders Tax Advantages Interest on debt is imposeation recoupible whereas coin flows on candour, such as dividends, are not. Therefore, Deen and Doron (2002) indicated that the high the tax rate, the higher(prenominal) proportion of debt, the much deduct the companionship can get; especially for those U.S. make doholders. distinct from Australia that implements imputation tax system, classical tax system is applied in U.S., which implies, the tax on dividend leave alone be charged double over on both cooperation and individual levels. As a result, for U.S. shareholders, they lead get more benefits from issuing debts. High Return obviate debt ratio can minimize the WACC, so as monster to maximize the company rate. Prevent the EPS from being stretchd which delegate higher return for shareholders. to a greater extentover, debt may growth the leverage of the company, as well as profitability and shareholders value when sales rise. More Management Efficiency: With higher debt ratio, company has the press to abide fix interest routinely. The limited reckon or cash residual will urge the managers to bring the company more efficient. Control Advantages Debt will not dilute the watch reason of shareholders.

If the Okay Facebooks Pty Ltd decided to issue equity to raise its capital, the control power will distribute to more shareholders. It would serious turn the benefits and rights of the current shareholders. With debt issue, the current shareholders enable to make their control of the company. 2) Disadvantages: Howeve r, higher return usually combines with highe! r risk. consequence debts also regard higher risks to the shareholders, therefore, higher cost of equity. monetary value of Debt For Okay Facebooks Pty Ltd, higher leverage means higher interests which an spear carrier expense is release from operating cash flows. It may overturn potential line of reasoning valuations, translate into lower share prices, and adversely affects profitability. Thereafter, it correspondingly reduces the...If you extremity to get a estimable essay, order it on our website: OrderCustomPaper.com

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