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If Investors All Have Personal Tax Rates on Debt and Equity

Question 13

Multiple Choice

If investors all have personal tax rates on debt and equity income of TD and TE,respectively,and if the corporate tax rate is TC,then the value of a levered firm exceeds the value of an otherwise equivalent unlevered firm by TgD.Which of the following is the correct algebraic expression of Tg?


A) If investors all have personal tax rates on debt and equity income of T<sub>D</sub> and T<sub>E</sub>,respectively,and if the corporate tax rate is T<sub>C</sub>,then the value of a levered firm exceeds the value of an otherwise equivalent unlevered firm by T<sub>g</sub>D.Which of the following is the correct algebraic expression of T<sub>g</sub>? A) B) C) D)
B) If investors all have personal tax rates on debt and equity income of T<sub>D</sub> and T<sub>E</sub>,respectively,and if the corporate tax rate is T<sub>C</sub>,then the value of a levered firm exceeds the value of an otherwise equivalent unlevered firm by T<sub>g</sub>D.Which of the following is the correct algebraic expression of T<sub>g</sub>? A) B) C) D)
C) If investors all have personal tax rates on debt and equity income of T<sub>D</sub> and T<sub>E</sub>,respectively,and if the corporate tax rate is T<sub>C</sub>,then the value of a levered firm exceeds the value of an otherwise equivalent unlevered firm by T<sub>g</sub>D.Which of the following is the correct algebraic expression of T<sub>g</sub>? A) B) C) D)
D) If investors all have personal tax rates on debt and equity income of T<sub>D</sub> and T<sub>E</sub>,respectively,and if the corporate tax rate is T<sub>C</sub>,then the value of a levered firm exceeds the value of an otherwise equivalent unlevered firm by T<sub>g</sub>D.Which of the following is the correct algebraic expression of T<sub>g</sub>? A) B) C) D)

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