If the only violation of the M&M assumptions is that investors face one tax rate for interest income and another tax rate for equity income, what is the implication for the optimal capital structure...

If the only violation of the M&M assumptions is that investors face one tax rate for interest
income and another tax rate for equity income, what is the implication for the optimal
capital structure of a corporation?
Answer:
M&M considers the corporate taxation and value of the firm remain unaffected by their
capital structure (Berkeley, n.d.). Personal taxation will have an impact on the investors in
selecting between the equity investment and debt investment. Investors will prefer to invest in
that...