Use the table for the question(s) below.
Consider the following top federal tax rates in the United States:
Personal Tax Rates

-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
 
-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 (19.3% + 14.5%) / 2 = 16.9%
τ* = 11ea7e5a_6ec5_bb4b_9a0a_19fcae63a5ce_TB1623_11 = 11ea7e5a_6ec5_e25c_9a0a_9b1e9496b49f_TB1623_11 = 0.00514

Use the Table for the Question(s) Below