The Jobs and Growth Tax Relief Reconciliation Act of 2003 significantly reduced the effective personal tax rates on dividend income for most U. S. investors. What effect do you think this act has had on corporate incentive to use debt?
Answer to relevant QuestionsWhat are the important direct and indirect costs of bankruptcy? Which of these, do you think, are the most important for discouraging maximum debt use by corporate managers? What factors might influence the choice between a bond issue with a sinking fund requirement and a serial bond issue? A problem with collateral is that its value is positively correlated with the borrower’s ability to repay. Explain. What is a debenture? Why do you think that this is the most common form of corporate bond in the United States, but is much less commonly used elsewhere? In what way can managers use dividends to con-vey pertinent information about their firms in a world of informational asymmetry? Why would a manager choose to convey information via a dividend policy? Does empirical evidence ...
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