The risk of tax shields can be reasonably assumed to be the same as that of the interest payments generating them.

Question

Quizplus · Accepted Answer

Tax shields are generated by interest payments and are therefore directly related to the level of risk associated with those payments. Higher interest payments generally correspond with a higher level of risk, and therefore higher levels of tax shields. As a result, the risk of tax shields is reasonably assumed to be the same as that of the interest payments generating them.

The Risk of Tax Shields Can Be Reasonably Assumed to Be