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Problem 18-5 Tax shields = = a. What is the relative tax advantage of corporate debt if the corporate tax rate is Tc = 0.21,
Problem 18-5 Tax shields = = a. What is the relative tax advantage of corporate debt if the corporate tax rate is Tc = 0.21, the personal tax rate is Tp = 0.32, but all equity income is received as capital gains and escapes tax entirely (TpE = 0)? (Do not round intermediate calculations. Round your answer to 4 decimal places.) = Relative tax advantage b. How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 20%? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Relative tax advantage
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