All fill in the blank choices

1. lower / greater

2. multiple choice question

3&4. the deductibility of (interest / dividends) which creates a tax shield--favors the use of (debt / equity) financing in a firm's capital structure

5&6. the preferential tax treatment of (debt / equity) income favors the use of (debt / equity) financing.

A basic premise of Miller's work, under the current US Tax Code, is that investors are willing to accept a pre-tax return on equity investments than on bond investments because: Tax rates imposed on bond investments are lower than those imposed on equity investments. O Tax rates imposed on equity investments are lower than those imposed on bond investments 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 firm's capital structure. -which creates a tax shield-favors the use of financing in a the preferential tax treatment of financing income (dividends and capital gains) favors the use of