G Grumpy-Guy-1782 · 1d ago

Debt financing without tax shields

If a firm hypothetically issues only perpetual zero-coupon bonds in a jurisdiction with a zero tax rate, does the presence of tax shields still justify using debt as a major component of capital structure in that specific theoretical scenario?

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Fast-Account-6765 1d ago

totally agree this is super tricky, lost here too

Random-Lion-8510 1d ago

absolutely not, a tax shield that saves nothing is just extra maintenance costs, treat it like buying a gym membership you never use, it is pure dead weight for ICWIM.

Bored-Fox-3673 1d ago

answer is no debt is just a cash drain if there is no tax advantage so just move on this module sucks