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eates additional expense without enough benefit through codt savings, income or capital gain, them it is not worth it True or fal

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

If debt creates additional expense without enough benefit through codt savings, income or capital gain, them it is not worth it True or false?

Definition Definition Increase in the value of a capital asset and the amount that is realized when the asset is sold off. A capital gain may be short-term or long-term depending on the tenure for which the asset is held.

Expert Solution

Step 1

Companies use debt in the capital structure because interest on debt is tax deductible and reduces cost of capital.

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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