Critical Thinking and Problem Solving
Australian corporate tax rate is amongst the highest in the developed economies. You are an investor looking at investing in one of two companies in the Australian market.
1) Would you agree to the comment that given the advantage of interest on debt repayment is tax deductible, one should invest in the company with the most borrowings?
2) The two companies you are currently looking at operates as education provider (such as NVT, GEM). Based on your understanding of the topic, they should be have the capacity to use more leverage. Do you agree? Why?