Which of the Following Statements Is CORRECT

question 41

Multiple Choice

Which of the following statements is CORRECT?

• A)Since companies can deduct dividends paid but not interest paid, our tax system favors the use of equity financing over debt financing, and this causes companies' debt ratios to be lower than they would be if interest and dividends were both deductible.
• B)Interest paid to an individual is counted as income for tax purposes and taxed at the individual's regular tax rate, which in 2008 could go up to 35%, but dividends received were taxed at a maximum rate of 15%.
• C)The maximum federal tax rate on corporate income in 2008 was 50%.
• D)Corporations obtain capital for use in their operations by borrowing and by raising equity capital, either by selling new common stock or by retaining earnings.The cost of debt capital is the interest paid on the debt, and the cost of the equity is the dividends paid on the stock.Both of these costs are deductible from income when calculating income for tax purposes.
• E)The maximum federal tax rate on personal income in 2008 was 50%.

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Definitions:

Accelerator Position

A measurement of the angle or level to which the accelerator pedal is depressed, influencing vehicle speed.

Analog Potentiometer

An electrical component that varies resistance in a circuit to control a device, often used to adjust levels such as volume.

Hall-effect TPS

A throttle position sensor using the Hall-effect principle to measure the position of the throttle in an engine, translating the throttle's position into an electrical signal.

Transmitting Torque

The process of transferring rotational force from one part of a mechanical system to another, typically via gears, belts, or shafts.