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American Recovery and Reinvestment Act 2009

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Using the American Recovery and Reeinvestment Act of 2009, need more clarity on:

How the Tax Shield could help a business who is about to close their doors gain control over their debt financing and how to evaluate the financial stress of a business who was struck by a natural disaster after they received ARRA gains. Is bankruptcy the only option?

How can a business who is just going to market use WACC to optimize their use of funds?

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Solution Summary

This solution explains tax relief for businesses during financial disaster. The sources used are also included in the solution.

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Tax shield is a reduction in income for a person or a business by claiming allowable deductions. This is a reduction in income taxes that a person or a business gets from taking allowable deduction. Now in the American Recovery and Reinvestment Act of 2009, companies get several tax incentives. One of these is that companies are allowed to use current losses to offset profits made in the previous five years, instead of two, making them eligible for tax refunds. If a company is about to close their doors, it means that it has made large losses in its current year. If the business offsets these losses against profits made during the past five year then it is likely that the company will get a ...

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