Which of the following is the best definition of interest tax shield?
A) The tax saving attained by a firm from interest expense.
B) Termination of the firm as a going concern.
C) The value of the firm is independent of its capital structure.
D) A firm's cost of equity capital is a positive linear function of its capital structure.
E) Financial restructuring of a failing firm to attempt to continue operations as a going concern.

Question

Quizplus · Accepted Answer

The interest tax shield refers to the tax saving that a firm achieves due to the deductibility of interest expenses from its taxable income. This reduces the firm's overall tax liability.

Which of the Following Is the Best Definition of Interest