--%>

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 : Key elements of the Shell’s ethical code

    What are the key elements of the Shell’s ethical code? Describe in brief?

  • Q : Human relation discuss the limitations

    discuss the limitations of human relations approaches to management

  • Q : Appropriations The term used in

    The term used in governmental accounting to identify amounts that the governmental unit is authorized to spend for debt repayment, operating activities, and asset acquisition. The appropriations account is a budgetary account that acts as a control account for all budgeted expenditures. More usua

  • Q : Understandability-Accounting information

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

  • Q : Explain Standard Costing Standard

    Standard Costing: A costing technique which joins costs to cost objects based on reasonable approximations or cost studies and by the means of budgeted rates instead of according to actual costs incurred. The predictable cost of gener

  • Q : Conditions in which fixed capital of

    Give circumstances in which the fixed capital of partners might change. Answer: Two circumstances in which the fixed capital of Partners might change are as follows:

  • Q : Budgetary accounts Accounts used in

    Accounts used in governmental accounting to record the budget amounts but not the actual amount. For example, at the beginning of the accounting period, the planned amount of tax revenue, revenue from license, and inflows from fines would be recorded as one amount in

  • Q : Elements of Partnership Three main

    Three main elements of Partnership: A) Carrying on of a business: • A ‘business’ is any trade, occupation or pr

  • Q : What is Activity Analysis Activity

    Activity Analysis: The identification and explanation of activities in an association. The activity analysis comprises determining what activities are completed within a department and how many people execute the activities, how much

  • Q : Describe fluctuating capital of partners

    Describe fluctuating capital of partners? Answer: Partner‘s capital is stated to be fluctuating if capital modifies with every transaction in the capital accou