an increase in a levered firm’s tax rate will:,

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reception, woman, secretary @ Pixabay

What happens when an increase in a levered firm’s tax rate will? A new study finds that it could have significant implications for the company and shareholders. Competition for the scarce tax dollars is fierce. Most countries operate with a progressive income tax system where higher-income earners are asked to pay more in taxes than lower-income individuals. This means that corporations are also subject to an increasing marginal rate of taxation as they grow larger and earn more money from their operations, which can limit future growth potential. But there’s another factor at play here: Marginal rates on corporate earnings vary considerably across different jurisdictions—it ranges from 0% to 42%. So when firms move between these regions, shareholders could experience significant increases or decreases in company value depending on whether those changes corresponded with favorable or unfavorable adjustments to the local tax regime. In this study conducted by researchers from MIT Sloan

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