Which one of the following statements concerning equity capital is INCORRECT?
A) When new equity is sold, the control of existing shareholders is weakened.
B) Equity capital is more expensive than debt capital.
C) Creditors have a senior claim to the assets of a firm before shareholders' claims.
D) Unlike interest payments, the firm can deduct the costs of dividends paid to shareholders.

Question

Quizplus · Accepted Answer

Dividends paid to shareholders are not tax-deductible for the firm, unlike interest payments on debt, which are tax-deductible. This makes statement D incorrect.

Which One of the Following Statements Concerning Equity Capital Is