Question
Assume hypothetically that the USA is faced with uncertainty over future corporate tax policies as a result of hypothetical upcoming presidential elections. The Democratic candidate
Assume hypothetically that the USA is faced with uncertainty over future corporate tax policies as a result of hypothetical upcoming presidential elections. The Democratic candidate has promised to increase the corporate tax rate by up to 10% if she wins the presidential elections. The Republican candidate on the other hand has promised to reduce the corporate tax rate by up to 10% if he wins the presidential elections. Run a sensitivity analysis of this tax uncertainty on WACC. Briefly explain the results, comparing between the relative impact of tax increases as compared to tax decreases of similar magnitude. Explain briefly how would you potentially deal with such corporate tax uncertainty in any valuation exercise.
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