If the Tax Laws Were Changed So That $0

question 33

True/False

If the tax laws were changed so that $0.50 out of e$1.00 of interest paid by a corporation was allowed as a tax-deductible expense, this would probably encourage companies to use more debt financing than they presently do, other things held constant.

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Definitions:

Margin Decision

Decision-making process that involves considering the incremental costs or benefits resulting from a particular action or choice.

Incremental Choices

Decisions made by comparing the additional benefits and costs of a little more or a little less of some activity.

Margin

In finance, the difference between the selling price and the cost of the goods sold, often expressed as a percentage of sales.

Economic Activity

The actions that involve the production, distribution, and consumption of goods and services in an economy.