361-CH1 - 1-1 CHAPTER 1 CONCISEIntroduction to Financial...

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Unformatted text preview: 1-1 CHAPTER 1 - CONCISEIntroduction to Financial ManagementForms of BusinessesGoals of the CorporationStock Prices and Intrinsic ValueSome Recent TrendsConflicts Between Managers and Shareholders 1-2Alternative Forms of Business OrganizationProprietorshipPartnershipCorporation 1-3Proprietorships & PartnershipsAdvantagesEase of formationSubject to few regulationsNo corporate income taxesDisadvantagesDifficult to raise capitalUnlimited liabilityLimited life 1-4CorporationAdvantagesUnlimited lifeEasy transfer of ownershipLimited liabilityEase of raising capitalDisadvantagesDouble taxationCost of set-up and report filingDouble Taxation of Corporate Profits/IncomeAssume Corporate and Individual Tax = 50%Earnings Before Taxes$100 EBT($50) Corporate TaxNet Income After Tax$50 NIAT (Profits)Assume 100% Div. Payout$50 Dividend Income($25) Personal Income Tax$25 After-tax IncomeNew Tax Code (2003): Max. Tax Rate of 15% for DIVEarnings Before Taxes$100 EBT($50) Corporate TaxNet Income After Tax$50 NIAT Assume 100% DIV$50 Dividend Income($7.50) Income Tax @ 15%$42.50 After-tax IncomeCorporate Income Taxes – 2006More than But not more than Then the tax is of the amount over $0 $50,00015%$0$50,000$75,000$7,500 + 25%$50,000$75,000$100,000$13,750 + 34%...
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This note was uploaded on 11/18/2011 for the course FINANCE 201 taught by Professor Lee during the Spring '10 term at Rutgers.

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361-CH1 - 1-1 CHAPTER 1 CONCISEIntroduction to Financial...

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