plz explain in brief...How debt becomes costlier for a company in case of low tax rate ?
Dear student,
We know that interest paid on debt is a tax deductible item. Accordingly, when the tax rate is lower the debt becomes costlier (company saves a lesser amount from tax). It such a situation it may opt for other sources of finance.
We know that interest paid on debt is a tax deductible item. Accordingly, when the tax rate is lower the debt becomes costlier (company saves a lesser amount from tax). It such a situation it may opt for other sources of finance.