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ACC501 Business Finance , GDB # 1 , Opening date November 18, 2014 , Closing date November 25, 2014 (marks 5)

Important announcement

Graded Discussion Board

Business Finance (ACC501)

 

Dear Students!

This is to inform that Graded Discussion Board (GDB) No. 01 will be opened on November 18, 2014 for discussion and last date for posting your discussion will be November 21, 2014.

 

Topic/Area for Discussion

 “Tax Shield”

 

This Graded Discussion Board will cover first 06 lessons.

 

Discussion Question:

If a company induces debt in its capital structure, it gets tax advantage i.e. its tax liability is reduced. This particular tax advantage is known as tax shield. Theoretically, it can be said in this case that the overall capital of a company should be financed through debt in order to avail maximum advantage. Is it practically possible and feasible? Discuss its impact on business entity.

Important Instructions:

  1. Your discussion must be based on logical facts.
  2. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
  3. Obnoxious or ignoble answer should be strictly avoided.
  4. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

Views: 4046

Replies to This Discussion

which lesson # is related to this GDB? can anyone tell me please that which lesson # should be studied to solve this gdb?

This Graded Discussion Board covered first 06 lessons.

 




Please share your ideas as per the above mentioned subject...

M new here. lets help each other.

koi tu thora ca idea share kry plzzzzzzz

Please Discuss here about this GDB.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

Dear all

want to know how to do this gdb, please give me some idea about it

mc140400252@vu.edu.pk

Asad Ali

Tax shields vary from country to country, and their benefits will depend on the taxpayer's overall tax rate and cash flows for the given tax year. These deductions reduce taxpayers' taxable income for a given year or defer income taxes into future years. For example, because interest on debt is a tax-deductible expense, taking on debt can act as a tax shield. Tax-efficient investing strategies are a cornerstone of investing for high-net-worth individuals and corporations, whose annual tax bills can be very high. The ability to use a home mortgage as a tax shield is a major benefit for many middle-class people whose homes are a major component of their net worth.

or koi b nhi hai yaha ACC 501 ka bs itny hi student hai....... kuch to search kro ......

A tax shield is the present value of future tax savings attributed to the tax deductibility of a particular expense in a company's P&L.

Usually the term in used in connection to interest on corporate debt (“tax shield of debt”).

Interest expense is, as opposed to dividends and capital gains, tax deductable, therefore the tax shield (being a benefit of debt financing over equity financing) is an important factor influencing the company's capital structure choice.

While academic research in general agrees on the importance of taxes for capital structure decisions, there is still a wide range of estimates of the magnitude of the tax shield. Empirical estimates for its value vary between 5 per cent and 15 per cent of corporate outstanding debt.

Research has identified besides the level of debt, the tax rate, credit risk, bankruptcy probability and the firm´s future financing policy (i.e. adapting future debt levels to changing economic conditions) as important variables influencing the value of the tax shield. 

Princess:

If you read the above information I hope you will understand the whole case.....If you reach any conclusion don't forget to post also...

agr hum point of discussion dobara sy dekhen to ,we can see k us ny tax shield ka nhi pocha ..........  " Theoretically, it can be said in this case that the overall capital of a company should be financed through debt in order to avail maximum advantage. Is it practically possible and feasible? Discuss its impact on business entity."is ka mutabik k oper byan ki gai bat me sara capital debt debt sy ikatha kiya tha....to kya ye practicaly possible or feasible hai k agr kisi company ka sara ka sara capital debt sy arrange kiya jay....or us pr tax shield bhi mily....... plz guide if I m not understanding the point of discussion

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