Assuming that bonds are sold at a fair price, the benefits from the tax shield go to the:

Question

Quizplus · Accepted Answer

The tax shield benefit from interest paid on bonds reduces the taxable income of the firm, resulting in a lower tax bill. This benefit ultimately goes to the stockholders of the firm in the form of higher earnings and potentially higher stock prices. Managers may benefit indirectly from this, but the direct benefit is for the stockholders. Bondholders do benefit from receiving interest payments, but they do not receive the tax shield benefit. Lawyers are not directly involved in this process.

Assuming That Bonds Are Sold at a Fair Price, the Benefits