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

question 63

True/False

The benefit of an interest tax shield is captured by the equity holders.

---

Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to fixed costs and profit.

Common Fixed Expenses

Expenses that remain constant in total regardless of changes in the level of activity or volume of production.

Variable Expenses

Costs that change in proportion to the level of activity or volume of production in a company.

Traceable Fixed Expenses

Fixed costs that can be directly associated with a specific business segment or product line.