Question

#1 blank (dividends / intrest)

The result of Miller's work is the conclusion that the US Tax Code produces two competing pressures that affect a business's use of leverage. These two conflicting effects are: the deductibility of -which creates a tax shield-favors the use of financing in a firm's capital structure. · the preferential tax treatment of financing income (dividends and capital gains) favors the use of

#2 blank (debt / equity)

#3 (equity / debt)

#4 (debt / equity)

I will make sure to thumbs up if correct. Thank you!

Answer 1

1.

the deductibility of interest - which creates a tax shield-favors the use of debt financing in a firm's capital structure.

2.

the preferential tax treatment of equity income favors the use of equity financing.

Explanation:

Equity has income in the form of dividends and capital gain and it has preferential tax treatment.