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fin multi - Chapter 01 1 Since the Tax Relief Act of 2003...

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Chapter 01 1. Since the Tax Relief Act of 2003, if a corporation or partnership has pre-tax earnings of $100,000 while the corporation is subject to a 34% income tax rate and an investor is subject to a 34% personal tax rate and a 15% capital gains tax rate, then what is the advantage to being a partnership (compared to a corporation) if all of the proceeds are paid out to investors in either legal form? a. -$43,560 b. $0 c. $9,900 d. $43,560 2. Which legal form of business organization offers the greatest protection to all of the owners of the firm in the event that the firm has a legal judgement against it? 3. If a firm hires an auditor to alert shareholders in the event that managers are pursuing their own interests (to the detriment of shareholder's interest) too aggressively, the firm is incurring: 4. Which type of legal form has the benefit of being taxed as a partnership but also has limited liability benefits? 5. The creditors of the firm have incentive to accept: a. very risky projects. b. projects that minimize the risk of the firm. c. projects that cause the firm to default and revert to the control of the creditors. d. none of the above.
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