Your friend has recently told you that the federal government effectively subsidizes the use of debt financing

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Your friend has recently told you that the federal government effectively subsidizes the use of debt financing (vs. equity financing) for corporations. Do you agree with that statement? Explain.

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Fundamentals of corporate finance

ISBN: 978-0470876442

2nd Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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Question Posted: Jun 12, 2012 12:56 AM

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Your friend has recently told you that the federal government effectively subsidizes the use of debt financing

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Your friend is correct Because interest expense on debt is tax deductible whereas dividend payme...View the full answer

Fundamentals of corporate finance

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