|Posted: 19 Dec 2011 at 15:06 | IP Logged
debt finance = you take a loan - pay interest - claim interest expense in your tax return
equity finance = you invest your own funds - pay dividends - dividends not a taxable expense - you pay more taxes
so, when marginal tax rate is high, debt financing is better.
non interest tax benefit:
If there is any scope to get a benefit by having your own funds instead of debt funds, then equity finance is better.
in a situation like - answer ( a ) debt financing is better