Use the Following Information to Answer the Question(s)below

question 71

Multiple Choice

Use the following information to answer the question(s) below.
Google Corporation has no debt on its balance sheet in 2008,but paid $1.6 billion in taxes.Assume that Google's marginal tax rate is 35% and Google's borrowing cost is 7%.
-Assume that investors in Google pay a 15% tax rate on income from equity and a 35% tax rate on interest income.If Google were to issue sufficient debt to reduce its taxes by $1 billion per year permanently,then the effective tax advantage of this debt would be closest to:

• A)10%.
• B)15%.
• C)25%.
• D)30%.

---

Definitions:

Unwilling to Move

A state of being resistant to change location or position, often used in the context of relocation or employment.

Sublet

The act of leasing out a rented property by the original tenant to a third party, often with the landlord's permission, under the terms of the original lease.

Illegal Act

Any action that is forbidden by law or statute and subject to criminal punishment or civil liability.

Assignment

The relocation of legal titles, belongings, or commitments from one party to another party.