Taxes & Business Strategy Acct 897/297 2013

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Taxes and Business Strategy
ACCT 897/297
Prof. Jennifer Blouin – Spring 2013
Email: blouin@wharton.upenn.edu
Phone: (215) 898-1266

Office: SHDH 1315
Office hours: by appointment, please email me
to schedule a meeting

Prerequisites:
Finance 601 or equivalent.
Materials
Textbook (REQUIRED): Scholes, Wolfson, Erickson, Maydew and Shevlin, Taxes and Business Strategy: A Planning Approach, Prentice Hall, 4th edition.
Canvas: This site includes course information, important announcements, online homework assignments and any lecture slides, course handouts, cases, problem solutions and optional articles. In-class handouts: On rare occasions will supplemental material be distributed in class. If distributed, these materials will also be available on Canvas (barring any copyright issues). After the second class, lecture slides will not be distributed in class. Please download these prior to class. Course Goals and Objectives:

Traditional finance and strategy courses do not consider the role of taxes. Similarly, traditional tax courses often ignore the richness of the decision context in which tax factors operate. The objective of this course is to develop a framework for understanding how taxes affect business decisions. The key themes of the framework are:

All Parties: Effective tax planning requires the planner to consider the tax implications of a proposed transaction for all of the parties to the transaction. All Taxes:

All Costs:

Effective tax planning requires the planner, in making investment and financing decisions, to consider not only explicit taxes (tax dollars paid directly to taxing authorities) but also implicit taxes (taxes paid indirectly as lower before-tax rates of return on tax-favored investments).

Effective tax planning requires the planner to recognize that taxes represent only one among many business costs. In the planning process all costs must be considered, including the costly restructuring of the business necessary to implement some tax plans.

The three themes are applied to decision contexts, such as investments, compensation, organizational form, financial instruments, tax-sheltered investments, family wealth planning, mergers and acquisitions, and multinational. The ultimate goal is to provide you with a new Prof. Blouin – Spring 2013

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approach to thinking about taxes (and all forms of government intervention) that will be valuable even as laws and governments change.
Part of being financially literate is a having a basic understanding of how taxation affects business, decisions that companies typically face: forming the business and raising capital, operating the firm, distributing cash to shareholders through dividends and share repurchases, expanding through acquisition, divesting lines of business, and expanding internationally. Taxes have a direct impact on cash flow and often divert 40% to 50% of the firm’s pretax cash flow to the government. Having an understanding of taxation and how firms plan accordingly is important whether you will be running the firm (e.g., executive in large company, entrepreneur, or running a family owned business) or assessing it from the outside (e.g., financial analyst, venture capitalist, or investment banker). Taxes are everywhere and it pays to have some understanding of them. A recurring theme will be linking the tax strategies that we learn with concepts from corporate finance, financial accounting, business law, and economics. We make extensive use of real transactions to illustrate the impact of tax structure on earnings and cash flow. I think you will find that people who understand how these rules work and how they interact have a distinct advantage in the marketplace.

Grading:
Your course grade will be determined as follows:
Quizzes (Best 3 out of 4)
Group Project
Online Homework
CDP&P
Total

150 points
50 points
20 points
30 points
250 points

Quizzes. Quizzes will be administered in class on the following...
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