An increase in the ________ is likely to encourage a corporation to increase its debt ratio.
A) corporate tax rate
B) personal tax rate
C) company's degree of operating leverage
D) expected cost of bankruptcy

Question

Quizplus · Accepted Answer

A higher corporate tax rate reduces a corporation's after-tax income, making debt financing more attractive compared to equity financing since interest payments on debt are tax-deductible.

An Increase in the ________ Is Likely to Encourage a Corporation