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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A-7

where Te, T 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.
Obond 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
hs
Transcribed Image Text:where Te, T 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. Obond 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 hs
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