Describe the tax benefits to a corporation of issuing debt rather than issuing stock

What will be an ideal response?

Answer: The greatest advantage to issuing debt is that the interest payments on debt are tax deductible, and that dividend payments are not tax deductible. In addition, the interest payment is a known amount, and the required return on debt is generally lower than the investor required return on equity because the cash flows to investors are more predictable for debt than they are for equity.