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 the personal tax rate on interest income equals 40%,for which tax rate on dividend income is the gain from leverage equal to zero?

A) 15.2%
B) 9.1%
C) 12.6%
D) 6.6%