Problem $17-7$ Tax shields

Suppose that Congress sets the top personal tax rate on interest and dividends at $38\%$ and the top rate on realized capital

gains at $17\%.$ The corporate tax rate stays at $23\%.$ Assume capital gains are half of equity income.

a$.$ Compute the difference between the total corporate plus personal taxes paid on debt and the total taxes on equity

income if all capital gains are realized immediately.

b$.$ Compute the difference between the total corporate plus personal taxes paid on debt and the total taxes on equity

income if all capital gains are deferred forever.

Note: Do not round intermediate calculations. Round your answers to $4$ decimal places.

Answer is complete but not entirely correct.