where Te, Ts and Ta represent the tax rates imposed on corporate income, personal income from equity investments, and personal income from debt investments, respectively. A basic premise of Miller's work, under the current US Tax Code, is that investors are willing to accept a investments than on bond investments because tax rates imposed on O equity investments are lower than those imposed on bond investments. O bond investments are lower than those imposed on equity investments. The result of Miller's work is the conclusion that the US Tax Code produces two competing pressures that affect a business's use of leverage. These two conflicting effects are the deductibility of the preferential tax treatment of which creates a tax shield-favors the use of pre-tax return on equity financing in a firm's capital structure; financing. income (dividends and capital gains) favors the use of
where Te, Ts and Ta represent the tax rates imposed on corporate income, personal income from equity investments, and personal income from debt investments, respectively. A basic premise of Miller's work, under the current US Tax Code, is that investors are willing to accept a investments than on bond investments because tax rates imposed on O equity investments are lower than those imposed on bond investments. O bond investments are lower than those imposed on equity investments. The result of Miller's work is the conclusion that the US Tax Code produces two competing pressures that affect a business's use of leverage. These two conflicting effects are the deductibility of the preferential tax treatment of which creates a tax shield-favors the use of pre-tax return on equity financing in a firm's capital structure; financing. income (dividends and capital gains) favors the use of
Chapter4: Additional Income And The Qualified Business Income Deduction
Section: Chapter Questions
Problem 18MCQ
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