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What is the relative tax advantage of corporate debt if the corporate tax rate is Tc = .39, the personal tax rate is Tp =

What is the relative tax advantage of corporate debt if the corporate tax rate is Tc = .39, the personal tax rate is Tp = .15, but all equity income is received as capital gains and escapes tax entirely (TpE = 0)? (Round your answer to 2 decimal places.) ANSWER: RELATIVE TAX AdVANTAGE = 1.39

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 15%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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