Your firm earns $800,000 a year before taxes on its investments and is in the 30%
marginal tax bracket. How much will you pay in taxes if you use 100% equity
financing and pay out 50% of your earnings as dividends to your shareholders? How
much will you pay in taxes if your investments are financed by $200,000 in long-term
debt at an interest rate of 9%?

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The Answer of Your firm earns $800,000 a year before taxes on its investments and is in the 30%
marginal tax bracket. How much will you pay in taxes if you use 100% equity
financing and pay out 50% of your earnings as dividends to your shareholders? How
much will you pay in taxes if your investments are financed by $200,000 in long-term
debt at an interest rate of 9%?

Your Firm Earns $800,000 a Year Before Taxes on Its