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please show steps where possible thanks Seth is the sole owner of a firm. He plans to purchase the company next door Pooh Corp. for
please show steps where possible thanks
Seth is the sole owner of a firm. He plans to purchase the company next door Pooh Corp. for $600,000, and he expects that the annual income before tax from ABC is $80,000. He is considering two financing alternatives: The first is to ask for a personal loan of $300,000 (for infinite duration) and pay the remaining amount from his savings. The second is to finance the purchase by having his firm take the $300,000 loan. The interest rate on the loan is 9% and the corporate tax rate is 40%. There is no personal tax. What will be the total amount received by the firm's share holders and debt holders in each scenario? Seth is the sole owner of a firm. He plans to purchase the company next door Pooh Corp. for $600,000, and he expects that the annual income before tax from ABC is $80,000. He is considering two financing alternatives: The first is to ask for a personal loan of $300,000 (for infinite duration) and pay the remaining amount from his savings. The second is to finance the purchase by having his firm take the $300,000 loan. The interest rate on the loan is 9% and the corporate tax rate is 40%. There is no personal tax. What will be the total amount received by the firm's share holders and debt holders in each scenarioStep by Step Solution
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