The interest tax shield is a reason why:Group of answer choicescompanies tend to minimise their borrowingthe net cost of debt to a company is generally less than the cost of equitythe overall value of an unlevered company is equal to the value of a levered firmthe cost of debt is equal to the cost of equity for a company with a debt-to-equity ratio of less than 1companies tend to prefer equity financing over debt financing PreviousNext

Which of the following is not an advantage of debt financing? Group of answer choices Shareholder control is not affected. Interest payments are cheaper than dividend payments. The return on shareholder’s equity may be higher. Interest is deductible from income for tax purposes.

An increase in the value of a previously all-equity firm occurs when debt is borrowed to repurchase stock because Blank______.Multiple choice question.shareholders prefer levered firmsshareholders capture the interest tax shielddebt has the same cost as equitydebt reduces the cost of equity

n the absence of taxes, the value of a firm is the same with debt financing as it is with equity financing because Blank______.Multiple select question.the asset to be financed is the samedebt financing is actually better than equity financingequity financing is actually better than debt financingMM demonstrated that debt financing is neither better nor worse than equity financing in the absence of taxes

The financial flexibility of a firm depends on the ……..Financial slack Tax shield Unused debt capacityFinancial flexibility

Which of the following is a benefit of merging two companies who both have optimal debt levels?Multiple choice question.a smaller tax shieldan increase in risklower debt capacityrisk reduction