Question
B formerly had an all-equity capital structure. Now they have taken on $5 million in debt. Assume their corporate income tax rate is 35% and
B formerly had an all-equity capital structure. Now they have taken on $5 million in debt. Assume their corporate income tax rate is 35% and the personal tax rate on debt is 35%. The personal tax rate on stock is zero. What is Bs gain from leverage? A. 5 million B. 3.25 million C. 1.75 million D. Zero
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Financial Econometrics
Authors: Peijie Wang
1st Edition
0415426693, 978-0415426695
