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NEW QUESTION: 1
The benefits of debt financing over equity financing are likely to be highest in which of the following
situations?
A. Low marginal tax rates and few noninterest tax benefits.
B. High marginal tax rates and many noninterest tax benefits.
C. High marginal tax rates and few noninterest tax benefits.
D. Low marginal tax rates and many noninterest tax benefits.
Answer: C
Explanation:
Choice "a" is correct. The benefits of debt financing over equity financing are likely to be highest if
marginal tax rates are high (because interest on debt is deductible for tax purposes) and if there are few
noninterest tax benefits (because there is little or no reason to depart from debt financing). Choice "b" is
incorrect. The benefits of debt financing over equity financing are likely to be highest if marginal tax rates
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tax benefits. Choice "c" is incorrect. The benefits of debt financing over equity financing are likely to be
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are few, not many, noninterest tax benefits.
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marginal tax rates are high, not low (because interest on debt is deductible for tax purposes), and if there
are few, not many, noninterest tax benefits.
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catch (exception& e)
{
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}
catch (...)
{
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}
return 0;
}
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C. Rules
D. Timing
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