Use the table for the question(s) below.
Consider the following top federal tax rates in the United States:
Personal Tax Rates
-In 2000,assuming an average dividend payout ratio of 50%,the effective tax advantage for debt (τ*)was closest to:

Question

Use the table for the question(s) below.
Consider the following top federal tax rates in the United States:
Personal Tax Rates 
-In 2000,assuming an average dividend payout ratio of 50%,the effective tax advantage for debt (τ*)was closest to:

Quizplus · Accepted Answer

B) The average personal tax rate on equity is (40% + 20%) / 2 = 30%
τ* = 11ea7db1_bd3c_9971_b9bd_859f721cd6f5_TB1619_11 = 11ea7db1_bd3c_9972_b9bd_25f2a097b7da_TB1619_11 = 0.241667

Use the Table for the Question(s) Below