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which of the following is correct about the effect of taxes on capital structure? a. taxes have little to no effect on a firm's capital structure. b. deductibility of interest favors a higher debt ratio and favorable tax treatment of stock income favors a higher equity ratio. c. deductibility of interest favors a higher equity ratio and favorable tax treatment of stock income favors a higher debt ratio. d. deductible dividend payments and higher taxes on stock income favor equity financing. e. interest being a nondeductible expense and lower taxes on stock income makes debt financing favorable over equity financing.

User Bandicoot
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Answer:

. b. deductibility of interest favors a higher debt ratio and favorable tax treatment of stock income favors a higher equity ratio

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User Porscha
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