?ntroduction
Th? cost ?f capital is th? rate ?f return that th? enterprise must pay to satisfy th? providers ?f funds. Th? cost ?f equity is th? return that ord?nary stockholders expect to receive from th?ir ?nvestment. Th? cost ?f loan stock is th? rate, which th? company must provide its lenders. Th? weighted average cost ?f capital (WACC) firm’s capital structure is th? average ?f th? cost ?f its equity, preferred stocks and loan stocks. (Aghion, 2006)
An ideal mix ?f debt, preference stocks and common equity can maximizes th? share prices. Debt capital is regarded, as cheap source ?f f?nance to th? bus?ness but will also ?ncrease th? f?nance risk ?f th? company. Common stocks regarded as less risky but might lead to loss ?f vot?ng rights if bought by outsiders. (Aghion, 2006)
Effects ?f Taxation on Debt Capital
Th? 1990s was ? decade ?f historically high rates ?f economic growth ?n Ireland. Accompany?ng this trend has been ? dramatic growth ?n th? price ?f property, which has seen house prices appreciate at an average rate ?f over 10 per cent per annum. Residential hous?ng plays an important role ?n th? economy. ?n th? majority ?f cases th? purchase ?f ? house represents th? most significant f?nancial ?nvestment an ?ndividual faces over th?ir lifetime. As such an ?ncrease ?n hous?ng wealth can contribute to economic growth via ?ncreased consumer spend?ng, aris?ng through equity withdrawal or through ? reduced sav?ngs rate. ?n addition to th? effect on consumption, hous?ng may also add to th? economy through stimulation ?f th? construction ?ndustry. (Bolton, 2006)
Property also acts as ? channel through which monetary policy affects th? real economy, via th? mortgage market. Property has unique characteristics; it represents both ? f?nancial asset, ...