If Congress increased the personal tax rate on interest, dividends, and capital gains butsimultaneously reduced the rate on corporate income, what effect would this have on theaverage company’s capital structure?

If Congress increased the personal tax rate on interest, dividends, and capital gains butsimultaneously reduced the rate on corporate income, what effect would this have on theaverage company’s capital structure?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section2.A: Taxes

Problem 1QTD

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Question

If Congress increased the personal tax rate on interest, dividends, and capital gains but
simultaneously reduced the rate on corporate income, what effect would this have on the
average company’s capital structure?

Definition Definition Increase in the value of a capital asset and the amount that is realized when the asset is sold off. A capital gain may be short-term or long-term depending on the tenure for which the asset is held.

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