Personal taxes on interest income and equity income will always increase the advantage of debt to a firm.

Name: Personal taxes on interest income and equity income will always increase the advantage of debt to a firm.
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Question

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Personal taxes on interest income are higher than taxes on equity income, thereby creating an advantage of equity financing over debt financing. When personal taxes on equity income rise, the advantage of debt financing decreases even more.

Personal Taxes on Interest Income and Equity Income Will Always