The Kimberly Corporation Is a Zero Growth Firm with an Expected

question 2

Multiple Choice

The Kimberly Corporation is a zero growth firm with an expected EBIT of $100,000 and a corporate tax rate of 30%. Kimberly uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
-Assume that the firm's gain from leverage according to the Miller model is
$126,667. If the effective personal tax rate on stock income is TS = 20%, what is the implied personal tax rate on debt income?

• A) 16.4%
• B) 18.2%
• C) 20.2%
• D) 22.5%
• E) 25.0%

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Definitions:

Planning

The process of setting goals, developing strategies, and outlining tasks and schedules to accomplish the goals.

Organizing

The process of arranging resources and tasks to achieve objectives efficiently and effectively.

Controlling Project Work

Involves monitoring, comparing, and correcting project progress and performance to ensure that project objectives are met.

Administrative Skill

The ability to efficiently manage operations, administrative tasks, and resources in an organization.