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Federal Income Tax Structure Deciding Debt/Equity Financing

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How does the federal income tax structure impacts a business decision to finance with use of debt vs. equity?

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Almost 250 words explain the impact of federal income tax structure on a company's decision to use debt or equity financing.

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A firm's long-term success depends upon the firm's investments earning a sufficient rate of return. This sufficient or minimum rate of return necessary for a firm to succeed is called the cost of capital. The cost of capital can also be viewed as the minimum rate of return required keeping investors satisfied.

Thus the objective of the capital ...

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