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What is the relative tax advantage of debt? Assume that personal and corporate taxes are given by T C = (corporate tax rate) = 35

What is the relative tax advantage of debt? Assume that personal and corporate taxes are given by TC= (corporate tax rate) = 35 percent; TpE = personal tax rate on equity income = 30 percent; and Tp = personal tax rate on interest income = 20 percent.

a. 1.76

b. 1.16

c. 0.86

d. 1.35

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