Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?
A)An increase in costs incurred when filing for bankruptcy.
B)An increase in the corporate tax rate.
C)An increase in the personal tax rate.
D)The Federal Reserve tightens interest rates in an effort to fight inflation.
E)The company's stock price hits a new low.

Question

Quizplus · Accepted Answer

An increase in the corporate tax rate makes debt more attractive because interest payments are tax-deductible, reducing the company's taxable income and thus its tax liability.

Which of the Following Would Increase the Likelihood That a Company