1. The interest tax shield (tax deductibility of interest) is a key reason why: the required rate of return on assets rises when debt is added to the capital structure. the value of an unlevered firm is equal to the value of a levered the net cost of debt to a firm is generally less than the cost of equity. the cost of debt is equal to the cost of equity for a levered firm.
Added by Debra M.
Step 1
Step 1: The interest tax shield, or tax deductibility of interest, refers to the tax benefit a company receives from deducting interest expenses from its taxable income. Show more…
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