Problemin 2014 stan smiths spy business generated 200k in, Ask an Expert

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Problem:

In 2014 Stan Smith's spy business generated $200K in sales and has a EBIT margin of 12%. Stan pays 100% of the profit as dividends to its owners (Stan himself). Stan expects the EBIT to stay constant. The corporate tax rate is 15%. The dividend tax rate is 15%. Stan's personal income tax rate is 20%. If the appropriate discount rate is 20%,

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Question: What is the present value of incorporating Stan Smith spy business as a corporation vs. keeping it as a sole proprietorship?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91149291

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