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You are provided the following information: Marginal personal tax rate on stock income = 30% Marginal personal tax rate on debt income = 35% Corporate

You are provided the following information:

Marginal personal tax rate on stock income = 30%

Marginal personal tax rate on debt income = 35%

Corporate tax rate (T) = 20%

Debtholders after-tax required rate of return (ki*) = 5%

(Perpetual) annual before-tax interest income stream = $100,000

What is the gain to financial leverage?

a- $260,000

b- $420,000

c- $180,000

d- $140,000

e- $320,000

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