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Basic question on corporate Tax and Personal tax, any help..?


Tc=Corporate Tax
Tp= Personal Tax on interest
Tpe = effective personal tax rate on equity income

When the equality (1 - TC)(1 - TPE) = (1 - TP) holds, then:
a)The firm should hold no debt
b)The tax shield on debt is exactly offset by higher personal taxes paid on interest income
c)The value of the levered firm is greater than the value of the unlevered firm
d)The tax shield on debt is exactly offset by higher personal taxes paid on capital gains.

The answer is one out of the 4..

538 day(s) ago

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Question Title Basic question on corporate Tax and Personal tax, any help..?
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