Okay Facebook

Question 1 Answer: 1) Advantages to Shareholders Tax Advantages Interest on debt is assess set offible whereas coin flows on comeliness, such as dividends, are not. Therefore, Deen and Doron (2002) indicated that the high the tax revenue rate, the higher(prenominal) proportion of debt, the much deduct the club can get; especially for those U.S. fateholders. distinct from Australia that implements imputation tax system, classical tax system is applied in U.S., which implies, the tax on dividend leave alone be charged retell on both cooperation and individual levels. As a result, for U.S. shareholders, they provide get much benefits from issuing debts. High Return take away debt ratio can minimize the WACC, so as mate to maximize the company honor. Prevent the EPS from being misdirectd which depute higher return for shareholders. to a greater extentover, debt may maturation the leverage of the company, as well as profitability and shareholders value wh en sales rise. More Management Efficiency: With higher debt ratio, company has the press to abide fix interest routinely. The limited calculate or cash residual will urge the managers to belong the company more efficient. Control Advantages Debt will not dilute the watch reason of shareholders. If the Okay Facebooks Pty Ltd decided to issue equity to raise its capital, the control power will distribute to more shareholders. It would serious turn the benefits and rights of the current shareholders. With debt issue, the current shareholders enable to curb their control of the company. 2) Disadvantages: However, higher return usually combines with higher risk. outcome debts also regard higher risks to the shareholders, therefore, higher cost of equity. damage of Debt For Okay Facebooks Pty Ltd, higher leverage means higher interests which an supernumerary expense is release from operating cash flows. It may commence potential line of reasoning valuations, translat e into lower share prices, and adversely aff! ects profitability. Thereafter, it correspondingly reduces the...If you extremity to get a encompassing essay, order it on our website: OrderCustomPaper.com

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