BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Other things remaining the same an increase in the tax rate on corporate profit well
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Make Dept relatively cheaper
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Make Dept relatively less cheap home
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No impact on the cost of death
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None of these
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Explanation:
Detailed explanation-1: -When there is an increase in the tax on corporate profit, the debt becomes relatively cheaper. This is because interest that is to be paid to the debtors is deducted from the total income before calculating the value of tax. Thus, as the value of tax increases, the debt becomes relatively cheaper.
Detailed explanation-2: -The answer is “2. An increase in the corporate tax rate."
Detailed explanation-3: -Which one of the following factors might cause a firm to increase the debt in its financial structure? Explanation: Interest on debt financing is tax-deductible whereas dividends from equity are not. An increase in tax rates might cause a firm to increase debt financing.
There is 1 question to complete.