Effect of Taxes on Capital Structure Decision
The alternative III is obviously the best.
Effect of Taxes on Financing Alternatives
Thus, the company will be able to raise dividend on shares to 25 per cent only if the return the new-project under the four alternatives are 54(A), 42(8), 47(C) and 30(0).
Above all, it should be remembered that financial theory has not developed to the point where data relative to these considerations are fed at one end of a computer and an ideal financial structure pops out of the other. Consequently, human judgement must be used to resolve the many conflicting forces in laying plans for the types of funds to be sought.