What is the relative tax advantage of corporate debt if the corporate tax rate is Tc=.35, the personal tax rate is Tp=.35, but all the equity income is received as capital gains and escapes tax entirely (TpE=0)? How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 15%? " Answer: Step 1: Tp = Tc = Step 2: Relative tax advantage formula = Relative tax advantage 15% TpE formula =