FSOT: 500 Test Prep Study Questions

Category - Mathematics & Statistics

What is the relative tax advantage of corporate debt, assuming a corporate tax rate of 40 percent, a personal tax rate of 27 percent, and that all equity income escapes taxation?
  1. 0.675
  2. 0.822
  3. 1.217
  4. 1.667
Explanation
Answer: C - 1.217
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