The personal tax on interest payments is 33%.The personal tax rate on equity capital gain is 15%.The corporate tax is 35%.Given all these tax rates and all otehr factors are kept constant,will investors have a preference to debt or equity? A.Cannot determine from the information provided B.Debt is preferred to equity C.Equity is preferred to debt D.M-M proposition I holds and the investors are indifferent between debt and equity
The personal tax on interest payments is 33%.The personal tax rate on equity capital gain is 15%.The corporate tax is 35%.Given all these tax rates and all otehr factors are kept constant,will investors have a preference to debt or equity? A.Cannot determine from the information provided B.Debt is preferred to equity C.Equity is preferred to debt D.M-M proposition I holds and the investors are indifferent between debt and equity
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The personal tax on interest payments is 33%.The personal tax rate on equity
A.Cannot determine from the information provided
B.Debt is preferred to equity
C.Equity is preferred to debt
D.M-M proposition I holds and the investors are indifferent between debt and equity
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