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  • 21-06-2021
  • Business
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If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase. Explain.

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tutordamola
tutordamola tutordamola
  • 22-06-2021

Answer:

The answer is issue debt finance

Explanation:

Should Stephenson wishes to maximize the total market value he should issue debt to finance the land purchase.

Why? - Because the interest payments of debt are tax deductible, A capital structure that has a debt will shrink the company’s taxable income, and will form a tax shield that will ultimately increase the total value of the company.

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