Any financial benefit derived from the interest tax shield accrues to the:

Question

Quizplus · Accepted Answer

The interest tax shield is the tax savings a company receives due to the tax-deductible nature of interest paid on debt. This benefit goes directly to the shareholders as it reduces the overall tax liability of the company, leading to an increase in profits and dividends. Bondholders do not benefit directly from the tax shield, as their returns are fixed regardless of the tax savings of the company. Therefore, the shareholders are the only ones who benefit from the interest tax shield.

Any Financial Benefit Derived from the Interest Tax Shield Accrues