3.

Which organizational forms give their owners limited liability? 4. What are the main advantages and disadvantages of organizing a firm as a corporation?

5. Explain the difference between an S corporation and a C corporation. 6. You are a shareholder in a C corporation. The corporation earns $2 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 40% and the personal tax rate on (both dividend and non-dividend) income is 30%. How much is left for you after all taxes are paid? 7. Repeat Problem 6 assuming the corporation is an S corporation. 8. In early 2009, General Electric (GE) had a book value of equity of $105 billion, 10.5 billion shares outstanding, and a market price of $10.80 per share. GE also had cash of $48 billion, and total debt of $524 billion. Three years later, in early 2012, GE had a book value of equity of $116 billion, 10.6 billion shares outstanding with a market price of $17 per share, cash of $84 billion, and total debt of $410 billion. Over this period, what was the change in GE