--%>

How do tax influence the cost of debt and equity

How do tax considerations influence the cost of debt and equity?

Since interest on debt is tax deductible to the issuing firm, the higher the tax rate the lower the after tax cost of debt financing.  Considerations of tax do not enter in the cost of equity calculation as dividends paid to stockholders are not tax deductible to the firm. 

   Related Questions in Managerial Accounting

  • Q : Fundamentals of Accounting Assignment

    Assignment 1: A adjusted Trial balance table given below: Southwest Business School

    Q : Changing responsibilities of the

    Write a short note on the changing responsibilities of the management accountant?

  • Q : Liability of partners Liability of

    Liability of partners: A) Under contract law: Liability is joint only (collectively); The creditor has only one right of action (except in NSW, where liability is now joint and several).

  • Q : Basic accounting principles or concepts

    ACCOUNTING CONCEPTS: Presented below are basic accounting principles or concepts, with which hospital managers should be familiar and that they should understand i

  • Q : When does a partnership exist A) A

    A) A partnership may be formed either expressly or impliedly, and in each case all the circumstances should be examined in order to ascertain: The intention of the parties; Whether there has been a

  • Q : Influence of managers

    Write down a short note on the influence of manager’s behavior in management accounting information?

  • Q : What is Incremental Cost Incremental

    Incremental Cost: The raise or reduction in total costs which would result from a decision to raise or reduce output level, to add a service or task, or to modify any part of operations. This information aids in making decisions such

  • Q : Explain Cost Allocation Cost Allocation

    Cost Allocation: This is a technique of assigning costs to activities, outputs, or other cost objects. The allocation base employed to assign a cost to objects is not essentially the cause of the cost. For illustration, assigning the

  • Q : Reliability-Accounting information What

    What do you mean by the term Reliability which is accounting information?

  • Q : Define Unit Cost Unit Cost : The cost

    Unit Cost: The cost of a chosen unit of a good or service. Illustrations comprise dollar cost perton, machine hour, labor hour, and department hour.