Effective Tax Advantage of Debt t* = (1 - ti) - (1 - tc)(1...
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Finance
Effective Tax Advantage of Debt
t* = (1 - ti) - (1 - tc)(1 - te)
When there are no personal taxes, or when the personal tax rates on debt and equity income are the same (ti = te), this formula reduces to t* = tc. But when equity income is taxed less heavily (ti 7 te ), then t* is less than tc .
can you show me the steps to get t*=tc because when I do it
I get t* = -tc
if we assume ti= 0 =te
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