Suppose that the corporate income tax rate is

30%, the personal income tax rate on dividend

income and the interest tax rate are both 35%, an

d the capital gains tax rate is 20%. What is the

after tax return on each dollar of corporate

earnings under the following three investment

financing strategies:

a)The corporation finances using debt.

b)The corporation finances by issuing e

quity but does not pay dividends.

c)The corporation finances by equity and

pays all its income in dividends.