Which of the Following Statements Is CORRECT

question 75

Multiple Choice

Which of the following statements is CORRECT?

• A) The maximum federal tax rate on personal income in 2010 was 50%.
• B) 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.
• C) Interest paid to an individual is counted as income for tax purposes and taxed at the individual's regular tax rate, which in 2010 could go up to 35%, but dividends received were taxed at a maximum rate of 15%.
• D) The maximum federal tax rate on corporate income in 2010 was 50%.
• E) 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.

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Definitions:

Molecule

The smallest unit of a chemical substance that can exist independently while retaining the compound's chemical properties.

Induced Labor

A medical procedure used to stimulate childbirth through methods such as medication or surgical interventions before labor begins naturally.

Methylation

A biochemical process involving the addition of a methyl group to DNA, proteins, or other molecules, affecting how genes are expressed.

Genetic Instructions

Information encoded within an organism's DNA that guides its development, functioning, and reproduction.