2. Your company has EBIT of $5,000,000, with a debt of $100,000,000 and required return of 20%. Currently, the corporate tax rate is 30%, the personal income tax rate on bond income is 30%, and the personal tax rate on stock income to 30%. Suppose that the senate is proposing to reduce the corporate tax rate to 20% and reduce the personal tax rate on stock income to 20% and leave the personal tax rate on bond income at 30%. The House of representatives is proposing to increase the corporate tax rate to 40%, leave the personal tax rate on stock income at 30%, and leave the tax rate on bond income at 30%.

1. Should your company lobby for the senate plan, or lobby against both to stay with the current tax rates? (Calculations required)

1. Briefly explain why the Senates proposed tax rates are better or worse for your company compared to current tax rates.

1. Briefly explain why the Houses proposed tax rates are better or worse for your company compared to current tax rates.