Analyzing the Impact of US Tax Reform on Corporate Valuation

This report provides a comprehensive analysis of the impact of US tax reforms on corporate valuation. It begins with an executive summary and introduction, outlining the background, aims, objectives, research questions, and rationale for the study. The literature review explores existing research on the topic. The research methodology section details the research approach, philosophies, design, sampling, data collection, and analysis methods. The study employs a quantitative approach, including surveys of professionals from firms like KPMG, Duff & Phelps, and Ernst & Young. The data collection and analysis chapter presents findings from the survey, examining the effects of tax reforms on operating income, financial disclosures, and brand value. The report concludes with recommendations and a conclusion, summarizing the key findings and suggesting methods for improving tax consideration and managing financial requirements. The report emphasizes the importance of understanding tax reforms for corporate decision-making and valuation.

Impact of the US Tax
Reform on Corporate
Valuations

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
CHAPTER 1: INTRODUCTION....................................................................................................2
Background.............................................................................................................................2
Overview................................................................................................................................2
Aim and Objectives................................................................................................................3
Research Questions................................................................................................................3
Rationale.................................................................................................................................4
Significance of Research Study..............................................................................................4
Research structure..................................................................................................................5
CHAPTER 2: LITERATURE REVIEW.........................................................................................7
CHAPTER 3: RESEARCH METHODOLOGY...........................................................................17
Research approach................................................................................................................17
Research philosophies..........................................................................................................17
Research design....................................................................................................................18
Sampling...............................................................................................................................18
Data collection......................................................................................................................19
Data analysis.........................................................................................................................19
Ethical consideration............................................................................................................20
Reliability and validity.........................................................................................................20
Research Limitation..............................................................................................................21
CHAPTER 4: DATA COLLECTION AND DATA ANALYSIS................................................22
DATA ANALYSIS..............................................................................................................22
CHAPTER 5: RECOMMENDATION AND CONCLUSION.....................................................32
RECOMMENDATION........................................................................................................32
CONCLUSION....................................................................................................................33
REFERENCES..............................................................................................................................34

EXECUTIVE SUMMARY
Examining various factors which affects the company valuation on which taxation plays the main
role in affecting the valuation of firm. Considering US tax rates, there have been several plans
and policies which are incorporated with making suitable reduction in the tax rates. Investors on
the other side, waiting for outcomes derived after these reforms in financial disclosure of firm. In
present study, there will be discussion based on US tax rate reforms affects the brand value of
industries. Researchers have been aimed at making suitable survey and study over the market and
on various industries for generating reliable information. It includes various arguments over the
US governmental plans and procedures. This research study will be based on quantitative
approaches on which researchers will conduct a survey in market or over industries as per
analysing issues and bring the analysed outcomes. Moreover, Interprevitism design of study has
been select by a researcher in relation with making the appropriate analysis over collected data
and representing the suitable justification over outcomes. In relation with data collection and
analysis requirements there have been selection of 20 professionals of various organisations such
as KPMG, Duff & Phelps and Ernst & Young. Moreover, they have been asked various open and
close ended questions on which they have presented their appropriate views and ideas which will
be helpful to researchers in terms of monitoring the issues in the business. Therefore, this
research study will be helpful as per analysing the wants and needs of corporate industries as per
managing the operations as well as suggesting them to make productive changes in organisations.
Overall, the experience of researchers after making study is that they have learned a framework
of taxation authorities in US and the current planning of government in terms of improving small
scale businesses.
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CHAPTER 1: INTRODUCTION
TOPIC: “To identify impacts of US tax reforms on corporate valuation”
Background
Reduction and appreciation of tax rates affects the revenue generation as well as valuation
of entities. Considering US tax rates, there have been several plans and policies which are
incorporated with making suitable reduction in the tax rates. Investors on the other side, waiting
for outcomes derived after these reforms in financial disclosure of firm. Positively, it will be said
that government has planned to reduce these charges which will be helpful to industries as per
making satisfactory gains through operations. Many companies do not make payments to taxes
which in context with the reason that they do not left with any profit for their operational
activities after making payments to corporate taxes. Thus, on which it brings the negative impacts
on reduction in their corporate valuation. Share prices and brand image come in danger as there
have been huge reduction in numbers of investors as well as capital structure of firm.
In present study, there will be discussion based on US tax rate reforms affects the brand
value of industries. There will be various stages and elements that will bring an adequate analysis
over research issues and suggest suitable ways and techniques which will be assistive and helpful
to the professionals of various companies. They will be suggested to make appropriate taxable
payments and analyse reforms of the government in positive manner.
However, this research study will also highlight impacts of such reforms in their financial
disclosures. It will have impact in cash flows, discount rates as well as terminal value of a firm.
Therefore, in accordance with such variations, there will be suitable suggestions which were
being awarded to professionals with increasing efficiency of business as well as techniques to
retain investors on long-term basis. Thus, to examine the facts there will be influences of 20
professionals of KPMG, Duff & Phelps and Ernst & Young. They will be asked several questions
regarding US tax reforms and the changes they have observed in company valuation.
Overview
Researchers have been aimed at making suitable survey and study over the market and on
various industries for generating reliable information. It includes various arguments over the US
governmental plans and procedures. To develop a suitable analysis over market with considering
fund and operational requirements needs of industries. The impact of governmental plans and
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policies affects revenue generation as well as operational activities in premises. Therefore, costs
levied over labour and material purchased by business in terms of making successive revenue
generation which in turn will have positive and negative impacts in the final outcomes.
It has been approached by US government in context with making suitable changes in the
taxation and present adequate charges over income generated by corporations. On the other side,
in consideration with manufacturing industries or other organisation, there will be requirement of
Research and Development expenses which bounds them to make huge expenditure over
producing innovative and unique products and services in market (The Impact of US Tax Reform
on Corporate Strategy, 2018). Their main aim is to generate higher consumers which results in
favourable operating gains which eventually helps in generating adequate investors on firm.
Reduction in taxes will help in restructuring their portfolio which will be attractive to
shareholders in fetching information regarding profitability and ability of a firm in making
suitable returns over the period.
Aim and Objectives
Aim: “To ascertain current US tax reforms and it affects corporate valuation”
Objectives:
 To identify the Current US tax Reforms and governmental policies
 To ascertain impacts of corporate tax rates in operating income of firm
 To identify current issues faced by industries in making taxable payments
 To suggest suitable methods in improving tax consideration as well as managing financial
requirements.
Research Questions
 What are the Current US tax Reforms and governmental policies?
 What are the impacts of corporate tax rates in operating income of firm?
 What are the current issues faced by industries in making taxable payments?
 What are the suitable methods in improving tax consideration as well as managing
financial requirements?
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Rationale
Objective of researcher is for making suitable identification of all issues which are usually
faced by corporations while analysing requirements and making satisfactory changes in
operations. Companies are bound to make taxable payments over income generated by them
which reduces their profitability that affects in further operation of business such as dividend
payments, operating expenses etc.
What: Corporate taxes mainly affect profitability of industries which in turn reduces the
financial viabilities. Firms are making higher corporate tax payments which results in poor net
income after tax that will be used in making payments to equity holders. Therefore, these affects
in bringing lower returns to investors on their invested capital in industries (Gupta, Akhter and
Chaklader, 2017). Main expenses of business are based on performing research and development
that needs a higher utilisation of funds. It is in terms of developing and designing the products
according to consumer desired level.
Why: Higher tax rates will eventually affect the revenue generation as well as further
operational activities of an industry. Therefore, reforms in taxation are quite necessary as per
having suitable operational gains and management of operations. Expenses of manufacturing,
retailing and service industries are comparatively higher and requires huge capital investments for
operations (Special Report: Corporate Tax Reform, 2017). Thus, taxable payments may affect
revenue generation and which will be less beneficial to investors in terms of having satisfactory
returns on their invested capital in entity. In addition, such variation affects capital structure of
entity and reduces brand image and valuation in market.
How: Research study will be helpful to analyse the impacts of US tax reform and recent
governmental changes in the policies and procedures to charge corporate taxes. There will be
suitable variations in brand valuation of entities (Singh, 2017). Suggestive information will be
facilitating among professionals of various industries as per analysing such reforms and making
effective ascertainment of taxable payment made by organisation.
Significance of Research Study
Research study will elaborate all required needs and wants of business as per analysing
market, taxation policies of government as well as analysing its impacts on the internal
management of firm. Operational activities and efficiency of a business will be enhanced as per
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developing suitable strategies and better management of Industrial practices in premises (Rouse,
2018). Capital allocation and decision making by professionals of an entity will have an impact
on reforms. Research analysis will be adequate in determination of various issues which affect the
business operations as well as corporate valuation.
Study will be ascertaining information relevant to current governmental plans and
regulations that will be favourable and unfavourable to business as per making suitable
operational changes. Identification of such changes in the rules and regulations will have post
positive as well as negative impacts in terms of raising the capital structure of an entity. These
effects in valuation and market price of company (RAJESHBHAI and MAHILA, 2018). US tax
rates reforms have been aimed at making economic changes in firm's financial stability and
capital collections. On the other side, impact of such changes will influence borrowing capacity,
valuation of assets as well as operating daily tasks of business.
Research structure
Thesis will be based on studying research issues on various elements. Each section in
research study will be helpful and adequate as per analysing results and making effective
operational gains to firm (Bagheri and et.al., 2017). Thus, to identify issues and make suitable
recommendations to professionals of entities the study is comprised with below listed framework
such as:
Chapter 1: Introduction
This chapter is a brief introductory analysis over governmental plans and policies which
help in reducing taxation rates levied over income generated by corporate industries. This section
of study has aim, objectives, rationale behind the research issues. It also defines the framework of
study. Therefore, the importance of this section is that it brings a framework among researchers
with performing suitable study and survey over the facts.
Chapter 2: Literature Reviews
This section of research study will be effective and eventually helpful as per
demonstrating views, ideas and thoughts of various authors. It will be helpful to researchers in
terms of retaining plethora of information regarding US taxation policies and current reforms
made by government (Schmera and et.al., 2017). Section is based on various merits and demerits
of issues which will help corporate agencies in analysing requirements and making suitable
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changes as per improving business operations. Discussion will be based on various taxation
reforms and issues faced by industries in terms of valuation and disclosure of financials at the end
of period.
Chapter 3: Research Methodology
This research chapter consist of various methods, techniques and tactics to perform the
market analysis and make a suitable suggestion over the derived outcomes. This research study
will be based on quantitative approaches on which researchers will conduct a survey in market or
over industries as per analysing issues and bring the analysed outcomes (Shaw and et.al., 2017).
Thus, such results will be adequate in enhancing knowledge and skills of researchers for
outcomes. Methodology play a main role in making satisfactory framework which will help
researchers in making perfect coordination in conducting study.
Chapter 4: Data Collection and Data Analysis
In this section, there will be collection of plethora of information with the usefulness of
conducting surveys over market or on industries. The research will be based on identifying recent
US tax reforms as well as taxable payments made by them. There will be use of various
techniques of data collection such as primary and secondary (Pyatak and et.al., 2017). Sources
which have been studied and analysed by researchers which will be measured and analysed that
brings suitable suggestions. This section of study will be useful as concrete solution will be
derived from adequate sources.
Chapter 5: Recommendation and Conclusion
This chapter is based on the outcomes derived from data collection and analysis made by
researchers. It will bring suitable solutions and recommendations to professionals of various
industries in terms of making adequate changes in the operational practices (Gupta, Akhter and
Chaklader, 2017). There will be suggestions based on financial disclosure as well as analysis of
organisation which will be supportive to businesses in capital generation.
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CHAPTER 2: LITERATURE REVIEW
Chapter is based on various analysing debates based on research issues. There will be
ascertainment of various operational activities as well as management of operations. This section
of research study will be effective and eventually helpful as per demonstrating views, ideas and
thoughts of various authors. It will be helpful to researchers in terms of retaining plethora of
information regarding US taxation policies and current reforms made by government. Section is
based on various merits and demerits of issues which will help corporate agencies in analysing
requirements and making suitable changes as per improving business operations. Discussion will
be based on various taxation reforms and issues faced by industries in terms of valuation and
disclosure of financials at the end of period (Singh, 2017). Thus, it comprises with various
thematic analysis based on various observations and acknowledgement of issues.
According to Stiglitz and Rosengard, (2015), US have strong Currency control all over
world which impacts over revenue generation as well as operational practices of industries in the
long run. It has been announced by the US government that they will reduce tax rates to 21% to
industries in terms of collecting revenue. Reduction in corporate tax rates will have positive
impact in making suitable disclosure of financial data set of an organisation. Therefore, 20%
reduction in tax rates will bring satisfactory gains to organisation. The main expenditures of
entity are based on making R&D which helps in designing the suitable products and services that
meets the satisfactory level of consumer. Hanlon, Lester and Verdi, (2015) stated that motive of
government is for developing the tactics and policies which is for reducing the tax rates to help
government and economy. Thus, due to these regard corporation will make payments to taxes and
which will be useful in generating government revenue. Moreover, it will affect in rising
economic level of local areas to improve domestic production.
According to Ahern, Daminelli and Fracassi, (2015), Reduction in tax rates will create
burden over corporate income. Therefore, impacts of such changes will affect the treatment of
corporate income that matches with treatment facilitated by trading partners. In relation with
partnership business, there will be requirement of adequate control over financial transactions
such as distribution of income as well as consideration of various allowances awarded by
organisation. Moreover, considering various reforms made by government which is aimed at
improving economic conditions of firm in a period. Determination of the financial needs of an
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organisation is based on earning revenues and they distribute it among various sectors such as
making returns to investors, paying interest generation on loan as well as in production of
operational practices. Therefore, reduction will have positive impacts in increasing revenue
generation of entity.
Tsoutsoura, (2015) stated that most organisations do not make payments of taxes as they
proposed issues is that higher tax rates affect their revenue generation as well as profitability
which in turn eventually reduces their investors. Therefore, lower revenue disclosed by an
organisation will affect lower investors will be attracted towards business for investment purpose.
Thus, in relation with this, there will be less collection of capital funds that affects capital
structure and financial environment of entity in due period.
Theme 1: To identify the Current US tax Reforms and governmental policies.
As per views of Stiglitz and Rosengard, (2015), taxable reforms will affect revenue
generation as well as capital ascertainment of industries working in environment. However, US
are best known for the highest statutory corporate tax rates in the world. Therefore, there are
various industries which have been charged with the highest taxes that in turn affects their trade
practices in the market. Thus, identification of such reforms will be beneficial as all corporate
industries will make payments of taxes collected over revenue of entity.
Considering causes and reasons professionals of various industries brings among
government that they do not make taxable payments because it affects their revenue and
operational activities. They said that payments to taxes will affect their generated revenue which
results in improper disclosures of the financial statements. Therefore, such disclosures will affect
retaining the attention of investors in organisation. They found organisation in less profitable and
is not able to make the suitable payments or returns. Moreover, reduction in number of investors
in the firm will affect its valuation in market. Hanlon, Lester and Verdi, (2015) said that, US is
consistently reducing the corporate tax rates after WWII. It was 32% in 1952 in consideration
with all the federal tax revenue which ascertain the 6% GDP of that period. Thus, it can be said
that the corporate tax will be third largest sources of governmental revenue generation. Thus,
plans and policies made in these regards are considerably treated as adequate revenue source for
government. It is based on various tax regimes which is stated around the world that interact to
distort allocation of international investments. Thus, reduction in microeconomic level of
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countries which reflect negative image of nation in world that will affect Foreign Direct
Investment (FDIs) in national boundaries. Thus, an international investors’ do not feel safe and
secure to make investments in the operations.
Ahern, Daminelli and Fracassi, (2015) stated that collection of revenue through cooperate
taxation will bring adequate stability in the economy. Thus, that will reciprocally affect balancing
GDP in the international market. It will be adequate and helpful techniques in reducing impacts
of global financial crisis over the nation. Moreover, reduction in corporate taxes will have
effective control over removing chances of repeating financial crisis as well as inflation in
market. Improved GDP rate will have appropriate control over domestic efficiency of nation.
Thus, that will be good for balancing employment level in economy.
Moreover, as per current legislative changes in the taxation policies of the US government
has had approached towards reducing corporate taxes. Therefore, it has been ascertained here that
the government planned to reduce tax at the rate of 21% corporations. Thus, that will be
profitable to businesses as per managing their share value in security market. Tsoutsoura, (2015)
said in relation with the summit of congress where the bill has been passed over federal marginal
tax rates to reduce it by the government at 21% from 35%. Therefore, there has been ascertaining
various legislation states limits which will be used by cooperate interest expenses as a fully
deductible tax shield. Thus, on which the interest deduction will be shielded by 30% over
earnings before interest, tax and dividends. Moreover, this approaches that such reformed and the
taxes will be levied over the earning till next 3 years. Thus, after that period there will be
legislation of taxes for 30% only over Earnings before interest and tax that is after 2022.
According to Stiglitz and Rosengard, (2015), Reforms created by the US government will
be helpful to the industries in terms of retaining the adequate amount of operating margin as well
as reduce the moderate debt to equity ratios. Therefore, which in turn will be helpful to the
industries in terms of gaining adequate gains which enhances their operating activities as well as
they will have sufficient amount funds for operations. Hanlon, Lester and Verdi, (2015) stated
that impacts of such variation in the valuation of the firm will be relevant with business activities
that has had impacts over reduction in interest rate which have deductibility on valuation. Impact
of such changes are based on making reduction in the free cash flows which were being
calculated and measured as per making taxable payments in long run.
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Moreover, it has been aimed by the government that reduction in taxable rated will have
positive rise in income that will be supportive as per balancing market value of firm in long run.
It will be attractive to investors as demonstrating profitability of industry in making payments of
dividends. Moreover, government approaches towards increasing the domestic production as well
as balancing trade practices in national boundaries which will be effective and helpful as per
rising economic level. Considering the valuation of firm, the reduction in taxable rates will have
impacts in rising the share prices and capital stability of the business for longer period.
Theme 2: To ascertain impacts of corporate tax rates in operating income of firm
Damodaran, (2015) determined that Operating income of a corporation is generated
through operational practices such as sale of products and services manufactured by them.
Income derived after making payment to all operating expenses such as salaries to employees,
variable and overhead expenses etc. remaining income will be utilised by firm in making
payments to the freeholder, paying off all their debts as well as balancing the operational
activities. However, the payments made by professionals on the operating income generated by
them are usually interest payable over the loan borrowed by them and the taxes. Thus, payments
of all debts of firm in each period will be adequate and helpful as per meeting suitable gains.
Impact of taxation in relation with addressing issues which were being faced by
organisations as per higher rate of tax legislated over income generated by them. Hanninen,
(2018) stated that taxation will be useful to society and government as per collecting the suitable
amount of funds for the further operational practices. There will be increment in infrastructural
facilities as well as per capital income of a location. Thus, the rise in economic condition will be
having appropriate control over operational advantages. Many nations have higher corporate
taxes such as Australia and UK have around 30-35% of taxation levied over income generated by
industries. This has negative impact in reducing income generated by entities.
As per views of Meier and et.al., (2016), there are various costs and expenses needed to
be barred by business professionals for managing operational aspects. Therefore, meeting such
operating requirements is prime task of business. Paying off all the debts such as salaries,
commissions, bonus, incentives, dividends, interest on loans etc. Thus, meeting such debts is
actually of higher costs and expenses.
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