Which of the following is true of the capital structure of a company from a tax standpoint?
A) In countries where there are no taxes, corporations are inclined to use debt.
B) In countries where capital gains are taxed, investors should show preference for debt.
C) In countries where capital gains are not taxed, equity capital costs should be high.
D) In countries where dividends are not taxed, the investors should show preference for debt.
E) In countries where capital gains are not taxed, investors should show preference for stocks.

Question

Quizplus · Accepted Answer

In countries where capital gains are not taxed, investors may prefer stocks because they can benefit from the appreciation in stock value without incurring tax liabilities on the gains.

Which of the Following Is True of the Capital Structure