Those who benefit from the interest tax shield are:
A)debt holders.
B)equity holders.
C)both debt holders and equity holders.
D)only the firm's customers benefit from the interest tax shield.

Question

Quizplus · Accepted Answer

The interest tax shield refers to the tax savings achieved by a firm through the deduction of interest payments on its debt from its taxable income. This reduction in taxable income decreases the firm's tax liability, effectively increasing the value available to equity holders. Debt holders benefit from interest payments directly, but the tax shield itself enhances value for equity holders by reducing the firm's tax payments.

Those Who Benefit from the Interest Tax Shield Are