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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

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?

Summary Introduction

To identify: The effect of change in personal tax rate on the company’s capital structure.

Introduction:

Capital Structure:

Capital structure refers to the securities or debt included in the total capital of the firm. Adequate capital structure is required for the optimum utilization of funds.

Explanation
  • Increase in personal tax rate on interest, dividend and capital gains will affect the shareholder’s tax liability, which leads to the negative effect on capital structure...

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