All else the same, firms facing relatively high tax rates should ______________.

Name: All else the same, firms facing relatively high tax rates should ______________.
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Question

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Firms facing relatively high tax rates should use more debt because interest payments on debt are tax-deductible, which reduces their taxable income and their tax liability. This strategy is known as the debt tax shield. By using debt, the firm can decrease its overall cost of capital and increase its earnings per share.

All Else the Same, Firms Facing Relatively High Tax Rates