NARRBEGIN: Bavarian Brew Bavarian Brew

NARRBEGIN: Bavarian Brew
Bavarian Brew
Bavarian Brew,an unlevered firm,has an expected EBIT of $500,000.The required return on assets for the firm's assets is 10%.The company has 250,000 shares outstanding.The company is considering raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase outstanding stock.
-Refer to Bavarian Brew.If the corporate tax rate equals 34% and dividend income is tax free,at which personal tax rate on interest income is there no gain from leverage?

A) 34%
B) 40%
C) 15%
D) 0%