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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A-7
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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