Explain the additional functions served by the collection of taxes other than the generation of revenue
What will be an ideal response?
Although the collection of taxes is essential for the generation of revenue needed to provide essential government services, taxes can be used to serve additional functions. For example, the government may wish to encourage the development of certain industries and discourage the development of others, so it may provide tax credits for firms entering the favored industries. As long as the "motive of Congress and the effect of its legislative action are to secure revenue for the benefit of the general government," the tax will be upheld as constitutional. The fact that it also has what might be described as a regulatory impact will not affect the validity of the tax.
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Discuss the use of producing speaker's notes and handouts for a presentation
What will be an ideal response?
Which of the following statements is FALSE?
A) Debt holders are not foolish—they recognize that when the firm defaults, they will not be able to get the full value of the assets. As a result, they will pay less for the debt initially. B) The costs of financial distress represent an important departure from Modigliani and Miller's assumption of perfect capital markets. C) Levered firms risk incurring financial distress costs that reduce the cash flows available to investors. D) When securities are fairly priced, the original shareholders of a firm pay the future value of the costs associated with bankruptcy and financial distress.