Highlands Company finances its operations with equity. Lowlands Company finances its operations with debt. The income statements of both companies show income before interest and taxes of $50,000. Highlands pays a $10,000 dividend while Lowlands pays $10,000 of interest expense. Assuming a 30% tax rate...

Highlands will incur $10,000 of tax expense.

Highlands will incur $12,000 of tax expense.

Lowlands will incur $12,000 of tax expense.

Lowlands will incur $15,000 of tax expense.