Which of the following is NOT a factor offsetting the tax advantage of debt as a source of financing?
A) increased agency costs
B) increased probability of financial distress (bankruptcy) due to fixed interest payments
C) alternative tax shields to those supplied by interest payments
D) All of the above offset the tax advantage of debt as a source of financing.

Question

Quizplus · Accepted Answer

All the options listed (increased agency costs, increased probability of financial distress due to fixed interest payments, and alternative tax shields) are factors that can offset the tax advantage of using debt as a source of financing.

Which of the Following Is NOT a Factor Offsetting the Tax