When taxes are factored in, debt financing creates positive value in the form of an interest tax shield.

Name: When taxes are factored in, debt financing creates positive value in the form of an interest tax shield.
Brand: Quizplus
Rating: 4.8 (37 reviews)

Question

Quizplus · Accepted Answer

Debt financing allows companies to deduct interest payments on their debt from their taxable income, which reduces the amount of tax they have to pay. This reduction in taxes is known as the interest tax shield, creating positive value for the company.

When Taxes Are Factored In, Debt Financing Creates Positive Value