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

Question

Quizplus · Accepted Answer

An increase in the corporate tax rate makes debt financing more attractive due to the tax deductibility of interest, which can lower the company's taxable income.

Which of the Following Would Increase the Likelihood That a Company