Does the U.S. tax structure influence a firm\'s willingness to finance with debt

ID: 2817454 • Letter: D

Question

Does the U.S. tax structure influence a firm's willingness to finance with debt? Why?

Yes; it is added to the Paid in Capital in Excess of Par

No; The interest increases the firm's solvency write off.

Yes; The interest on the debt is deductible on the Income Statement.

No; The use of debt will always reduce the ROE on the tax return.

Yes; it is added to the Paid in Capital in Excess of Par

No; The interest increases the firm's solvency write off.

Yes; The interest on the debt is deductible on the Income Statement.

No; The use of debt will always reduce the ROE on the tax return.

Ans option C

Yes interest paid on debt is deductible in income statement and thus reduces tax liability

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