Rao Ramesh K. S.; C, Stevens Eric - In: The B.E. Journal of Economic Analysis & Policy 6 (2006) 1, pp. 1-57
This paper develops a theory of the firm's weighted average cost of capital (WACC) and the marginal tax rate with risky debt and potentially redundant depreciation and interest tax shields. The tax shields' risks, the firms borrowing interest rate and its marginal tax rate are intertwined, and...