Suppose you work for a business that runs a fleet of cars the sales personnel use. The fleet consists of 30 Toyota Camry sedans. All the expenses (insurance, registration, fuel, maintenance, and...

Suppose you work for a business that runs a fleet of cars the sales personnel use. The fleet consists of 30 Toyota Camry sedans. All the expenses (insurance, registration, fuel, maintenance, and repairs) are paid by the firm. You have determined that it is cost-effective (from a tax and operations cost viewpoint) to “roll the fleet over” every 3 years. You plan to auction the cars.

 a. Are there any agency costs (incentive problems) with the arrangement that the firm pays all the costs of operating the cars?

b. Are there any agency costs with selling the cars?

c. How might you mitigate the problems in parts (a) and (b)? Outline any new problems your suggestions might create.

Q116;

Suppose the top corporate statutory tax rate will decrease from 35% to 30% next year. The CFO of ABC Corporation wants to defer as much income as possible and asks you to prepare a detailed list of actions to shift income (that is, ways in which the firm can shift income). For each action, she wants you to outline any nontax costs associated with the action.