Financial Management: Tax, Capital Budgeting and Financial Markets

FINANCIAL MANAGEMENT

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By student name
Professor
University
Date: 25 April 2018.
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Contents
Abstract and Background............................................................................................................................3
Introduction.................................................................................................................................................3
Analysis and Discussion...............................................................................................................................3
Question 1...................................................................................................................................................3
Question 2...................................................................................................................................................4
Question 3...................................................................................................................................................5
Question 4...................................................................................................................................................6
Question 5...................................................................................................................................................7
Question 6...................................................................................................................................................9
Question 7...................................................................................................................................................9
Conclusion.................................................................................................................................................10
References.................................................................................................................................................10
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Abstract and Background
In the given assignment, we have been asked several questions from different topics which have been
answered as per the requirements.
Introduction
There are seven questions in the given assignment relating to tax, capital budgeting and financial
markets. All the questions have been answered separately. The solution is followed in the analysis.
Analysis and Discussion
Question 1
a) The Firm, Sandersen Inc’s taxable income is $ 1,225,000.
Computation of tax liability is as follows:
Amount in $
Income Slab Tax Computation
Upto 50,000 50,000 x 15 % = 7,500
Next 25,000 25,000 x 25 % = 6,250
Next 11,50,000 11,50,000 x 34 % = 3,91,000
Tax Liability 7,500 + 6,250 + 3,91,000 = 4,04,750
Surtax @ 5 % (3,35,000 – 1,00,000) x 5 % = 11,250
Total Tax Liability 4,04,750 + 11,250 = 4,16,000
The corporate tax liability of Sandersen Inc is being computed to be $ 4,16,000.
b) Raising of revenue in order to meet the growing government expenditures was the primary
objective of taxation. As we know, that financing for most of the activities of the government is
financed through taxes. However, financing of governmental activities is not the only objective
of taxation. There are some objectives which are non-revenue in nature (Goldmann, 2016).
Taxation is being considered as an important instrument for framing the economic policy of the
nation. The taxation policy of the government affects not only the governmental revenue but
also various other factors are affected, for instance, consumption, income distribution,
investments, volume of production, balance of payments, choices in relation to industrial
techniques and industrial locations. Moreover, the taxation policy also plays a very important
role in the employment generation, development of economy, control of cyclic fluctuations,
stability in prices, reducing the difficulties relating to the balance of payments thereby
encouraging imports substitutes’ production and also in achieving of various objectives which
are not of revenue nature by charging taxes equitably rather than equally, i.e., the rich people
are taxed at a higher rate while the poor is taxed at a lower rate. Thus we can see that there are
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