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c. The tax bill passed by the US Congress a few years ago lowered corporate tax rate on US firms to 20%. The tax bill
c. The tax bill passed by the US Congress a few years ago lowered corporate tax rate on US firms to 20%. The tax bill also did very little to close a number of loop-holes firms use to reduce their taxes. Based on this reduction in the effective tax rates US firms pay, what does static trade-off imply with respect to changes, relative to pre-tax-bill levels, in (a) the optimal amount of debt firms will have in their capital structure, (b) the values of firms (if nothing else other than the tax rate changes), and (c) the likelihood of future bankruptcies. Why?
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