Debt interest is a _______expense that is particularly important for companies with high tax rates.

Q: Corporate Finance If a company is profitable and pays taxes, why is the cost of its debt rd(1-t),…

A: The objective of the question is to understand why the cost of debt for a company that is profitable…

Q: DEBT MAY BE BENEFICIAL IN CORPORATE GOVERNANCE FOR THE FOLLOWING REASONS EXCEPT: Select one: O a.…

A: CORPORATE GOVERNANCE: These are the rules the firm need to follow and through which firms are…

Q: Why do corporations pay higher interest rates on debt than the US federal government?

A: Interest rates are charged based on the risk factor allotted to them. Higher the risk higher the…

Q: 1b) Banks offer overdraft facilities and term loans, among other services, to their corporate…

A: The answer is stated below:

Q: debt financing.

A: Debt financing refers to the amount which is raised by the company after selling the debt…

Q: Financing with Debt Versus Equity. It is commonly understood that the cost of financing a…

A: For any entity, there are two ways of raising funds: Equity Financing and Debt Financing. Companies…

Q: Discuss MM proposition II under the situation when there are corporate taxes and risk-free debt.

A: Corporate tax is defined as the tax on the corporate's tax. Here, taxes used to make the payment on…

Q: How does our tax system influence the use of debt financing by corporations?

A: Answer: If a company uses debt financing, it will pay interest while if it uses stock, dividends are…

Q: If the corporate tax rate is greater than zero, how would taxes affect the firm's cost of capital?

A: Solution:- Cost of capital means the minimum rate of return required by the investors of a firm ie.…

Q: Two considerations that cause a corporation's cost of capital to be different than its investors'…

A: Cost of capital of a company is the weighted average cost of different sources of capital like…

Q: The after-tax cost of debt is ________. A) lower than the cost of common stock but higher than the…

A: We use after tax cost of debt because we get tax deduction on interest payments which is not there…

Q: cycles: O a. capital acquisition and payments O b. Inventory and warehousing O c. payroll and…

A: Bad debt is an expense that a business incurs once the repayment of credit previously extended to a…

Q: Which of the following are true about debt and equity interest payments are generally tax deductible…

A: Debt refers to borrowed money that must be repaid over time, typically with interest. In this form…

Q: whether the statement is true or false.

A: Asset-based financing is the finance availed by a company in lieu of its assets. In such cases, the…

Q: Explain the advantages and disadvantages of the use of debt to a company

A: Debt - Debt is a source of fund to a company on which company pay an annual fixed payment. and that…

Q: 3. Which of the following securities do not provide tax advantage to the company? A. Bond B. Equity…

A: There are various financial instruments some may provide tax benefit and other may not.

Q: Indicate whether each of the following statements is true or false. Support your answers with the…

A: When a company raises debt, it becomes liable to pay interest on the borrowed amount. However, the…

Q: One of the primary reasons for investing in debt securities includes a. Deducting interest payments…

A: One of the primary reasons for investing in debt securities includes Earning interest revenue.…

Q: FASB allows debt to be shown at its fair market value. Consequently, if a company in financial…

A: Financial Accounting Standards Board (FASB) The FASB, located in Norwalk, Connecticut, is an…

Q: Corporate Finance If a company is profitable and pays taxes, why is the cost of its debt rd(1-t),…

A: Why Profitable, Tax-Paying Companies Enjoy a Lower Cost of Debt (rd(1-t)) For prosperous enterprises…

Q: it typically has a higher cost of capital than equity. it carries voting rights.

A: Debt financing occurs when a company raises capital by selling debt instruments to investors. The…

Q: When analyzing a company's financial report, what are the most likely indicators that a company is…

A: A tax is a financial charge imposed by government. It is a source of income for the governments to…

Q: One reason a company may choose to issue additional debt instead of equity when raising capital is…

A: cost of capital refers to the cost that is to be charged on the business operations. It is…

Q: Explain the concept of Tax Deduction in WACC. Does this tax deduction make debt finance Cheaper Then…

A: WACC is the weighted average cost of equity, cost of debt and cost of preference capital.

Q: A corporation that uses debt concentrates the risks of the business on the ___________.

A: Answer

Q: The tax shield provides one of the benefits for obtaining debt financial capital True   False

A: A tax shield refers to any reduction in taxable income resulting from deductions, exemptions, or…

Q: It can be true that for one industry, a certain level of debt is acceptable, but for another, it can…

A: The level of acceptable debt varies from one industry to another and while for one industry a given…

Q: True/False and Explain: Josephine says that firms which obtain debt financing by posting collateral,…

A: The objective of the question is to determine whether the statement made by Josephine is true or…

Q: The other term for a debt-free firm is ____________

A: If a company has zero debt on its balance sheet, then it is known as a debt-free company.

Q: ntion that in the absence of the tax advantages of debt the use of gearing can increase the expected…

A: The use of debt is very common in organization because the debt had the tax advantages due to which…

Q: When estimating cost of debt, the coupon rate is used as the cost of debt. Group of answer choices…

A: Cost of debt is a significant factor for any organisation to assess. The same is also used to…

Q: True or False: When a company borrows money to finance the purchase of an asset to use in its…

A: Every organization's wants to achieve that much earing so that they can save amount after paying its…

Q: 15. In comparison to the case when there is only corporate tax, the benefit of debt tend when there…

A: Tax should be deducted from the earnings to get the net earnings. When personal tax is applied along…

Q: Which of the following is not primary reason why corporation invest in debt . Select one: a. they…

A: There are several reasons why corporate invest in debts or equity. They mainly includes: They have…

Q: The interest tax shield adds value to a levered (part debt part equity) firm. A True B False

A: The objective of the question is to determine whether the interest tax shield adds value to a…

Q: Companies borrow because it is in their best interests financially.

A: The given statement is True..... Companies borrow because it is in their best interests…

Q: How any company is taking tax advantage of bonds payable or any other fixed cost financing?

A: Bond can be considered as an I.O.U between the lender and the borrower that contains details about…

Q: Why do the companies in high tax brackets incur lower after-tax interest costs by financing through…

A: Debts are the liability issued by the company to raise funds. The debt holder receives fixed…

Q: The higher the debt level, the greater the burden borne by ___________ and the cost of debt.

A: The cost of debt is the rate a company pays on its debt

Q: 16. Despite the tax benefit of debt, a firm may refrain from using only debt financing, A. because a…

A: The correct answer to the question is option A. With increase in debt, the bankruptcy cost also…

Q: How does the WACC DCF methodology mechanically incorporate interest tax shields (select the best…

A: The correct answer is "By estimating a discount rate that incorporates the tax benefits of debt."In…