International Finance - funding your capital projects
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1. The tax code gives companies a strong preference for funding capital spending with debt rather than with equity. Equity is punished in our tax system. If you could change the tax laws regarding the tax deductibility of interest, what would you do? Why?
2. If you are a company with high operating leverage (variable costs are a small percentage of the sales dollar) what is your best external option for funding your capital projects? Why?
3. What are the most important concepts about International Finance? Why? How might you use these concepts in your future work endeavors?
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Solution Summary
This solution discussed taxes, capital projects and International Finance concepts.
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1. The tax code gives companies a strong preference for funding capital spending with debt rather than with equity. Equity is punished in our tax system. If you could change the tax laws regarding the tax deductibility of interest, what would you do? Why?
I would change a number of things with our tax system. The interest does help when it comes to banking; however, one needs to have at least 20% interest instead of 5% interest or less when it comes to putting money away in a savings account or any other for that matter. We as citizens are taken advantage of because banks make a lot of money when it comes to credit cards. They take every opportunity to make it hard for a person or family to pay them back, yet keep the interest ridiculously low for the the other accounts, such as cds or with savings. Regardless, this is wrong and it takes advantage of the consumer because they are not getting their money's worth. ...
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