The Benefit of an Interest Tax Shield Is Captured by the Equity

question 58

True/False

The benefit of an interest tax shield is captured by the equity holders, not the debtholders.

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Definitions:

Venture Capital

Financing that investors provide to startup companies and small businesses believed to have long-term growth potential.

Start-Up

A newly established business, often focused on a unique product or service, aiming for rapid growth and market penetration.

Retained Earnings

The portion of a company's profits that is kept in the business after dividends have been paid to shareholders, used for reinvestment.

Undistributed Profits

Earnings that a company has made that are not paid out as dividends to shareholders and are instead reinvested in the business or kept as reserves.