1. What role do hidden-action problems play in limited partnerships and other joint ventures? How might the cost of these problems be reduced?
2. How might bond covenants influence a firm’s tax-planning activity? Provide an example for firms that use LIFO for inventory costing.
3. How might tax considerations conflict with financial reporting considerations? Provide an example from the banking industry.
4. If managers are compensated, in part, on the basis of a bonus based on accounting earnings, they are likely to object to any tax plans that reduce reported earnings. What actions could the firm take to mitigate this concern?
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