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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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