Double Exit

For most accounting and finance students the principle that interest on debt is tax deductible and the requirement to incorporate this into a cost of capital calculation is something that is learned off and rarely questioned. It is unlikely that many students (or lecturers) stop and ask the question of why? And what impact does that have on business and the economy? Or, more importantly, what impact would it have if it was removed (or reduced)?

From a personal finance perspective, interest relief on your mortgage has been removed since 2012 for new borrowers and will be completely abolished by 2017. From a corporate perspective, tax relief on interest in still an important subsidy for business. The Economist recently focused on this topic as its cover story (May 16th). Here (1 & 2) are links to two great articles discussing the history of this subsidy and also the potential impact of its removal.

These articles provide a bit more of a critical insight into the area of corporate finance for students to consider.