how do tax considerations affect the cost of debt, Financial Management

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how do tax considerations affect the cost of debt

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

As interest on debt is tax deductible to the issuing firm, as much higher the tax rate the lower the after tax cost of debt financing.Tax considerations do not go through into the cost of equity calculation as dividends paid to stockholders are not tax deductible to the firm.

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