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So many misstatements, so little time.

"Investors who lend you money are not concerned about income taxes since they are paid interest which is a tax deductible COST. They only want to be sure that you make a profit so that you CAN pay income taxes and that there is enough revenue to pay the interest and principle."

Most people do not consider lenders to be investors. Sometimes lenders are referred to using the more generic form of that term, but that obviously was not my intent.

"Investors who buy stock are generally investing for the Capital Gain in the Stock and again are not concerned about income taxes since often the CGs come before any profits are made. Generally the stocks having the largest capital gains do not pay dividends either."

Here we go again, fragmenting the various components of economics and pretending they exist in isolation, never affecting each other. What makes a stock appreciate in value? Earnings. What type of earnings? Net Income. What is Net Income? Net AFTER TAX Earnings. Please don't tell me there are other factors that affect the value of an equity. I know that. Nevertheless, all other things being equal, a business that has a higher Net Income will be valued higher than one that has a lower income.

"Once more your cluelessness is apparent since the potential investor has to face the same income tax for ANY investment thus it cannot be a factor in his decision."

I hate to break the news to you, but the market for investment capital has gone global. Therefore, your contention that corporate income taxes are a constant is incorrect. Even when you compare alternative investment opportunities within the USA, taxes are hardly uniform in their application and they most certainly are a factor in (equity) investment decisions. For example, I have seen situations in which mergers were carried out solely to preserve tax NOL carry-forwards of the predecessor. The company being acquired had no value (in some cases), except to shelter future profits from taxation. In other cases, start-up technology companies showed higher after-tax pro-forma earnings because they would be able to take advantage of R&D tax credits. Therefore, a premium would be paid for their future (pre-tax) earnings because of a lower effective tax rate.

I could give other examples, but those on this thread who don't have their own agenda can grasp this concept very quickly. The point is that (1) taxes are NOT constant, contrary to justshut's unsupported assertion, and (2) they most definitely enter into equity investor's decisions, IOW these people look at the "bottom line" in terms of total return.

Thanks for the link to your textbook, YN. I had a decent introduction to economics quite a few years ago and better than decent training in accounting. However, having been in financial management for quite a few years, I have actually put many of these concepts into practice. My understanding of how a company prices its products, for example, does not come (solely) from a textbook. It comes from being involved in pricing decisions and debating these issues with CEOs, VPs of Sales & Marketing and other senior managers.

Apparently you have never heard of Corporate Bonds or Preferred stock. And the idea that they are purchased by INVESTORS will undoubtably be shocking.

You really haven't paid much attention to stock movements have you? If you had you would have noticed that the fastest rising stocks are often those WITHOUT any net earnings. Investors are betting that there WILL be earnings but NOT on the fact that there ARE currently earnings. Once the company settles down into a consistent earning pattern the days of high flying prices are over. Ebay is an excellent example of this. Conversely you will find mean companies with low P/E which barely move in price.

Disregarding accounting tricks the decision to invest is unaffected by income taxes since 38% is 38% so the key is to select the company with higher gross profits which means the 62% remaining is larger. It will also be larger with 0% IT or with 95% IT.

I never said that IT are "constant."

Analysis is necessary for understanding and that means to break apart and isolate the aspects of a concept from everything else as much as possible. Reintegration of the knowledge derived to view the whole is then the next step by a competent analyst. Economics is predicated upon using strict assumptions to establish a model which can then be manipulated by selectively relaxing the assumptions.