--%>

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 : Information that a manager need to make

    What is the various information that a manager need to make a decision?

  • Q : Bank reconciliation statement Explain

    Explain the term bank reconciliation statement?

  • Q : Reliability-Accounting information What

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

  • Q : Explain Operating Budgets Operating

    Operating Budgets: It is a financial document which aids a business in making significant decisions regarding its actions. An operating budget does not contain instant impact on the actual state of the business and exhibits only future projections. Bu

  • Q : Capital gain The increase in value that

    The increase in value that the owner of a capital asset receives when the asset is sold. The owner pays tax on that gain or increases, at a lower rate if the assets that are sold are capital asset, such as factory buildings, rather than assets that are sold in the nor

  • Q : Factors due to changing business

    What are the various factors which occurred due to the changing business landscape?

  • 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 : Why most of the larger businesses are

    Why most of the larger businesses are not managed as the single unit through one manager?

  • 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.

  • 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