If the US Government Completely Eliminated Taxation at the Corporate Level

question 59

Multiple Choice

If the U.S. government completely eliminated taxation at the corporate level:

• A) We would expect to no change in the capital structure since it is independent of the tax rate.
• B) We would expect to see lower debt levels since debt would no longer enjoy a tax advantage.
• C) We would expect to see higher debt levels since debt would become cheaper relative to equity.
• D) We would expect to see higher percentages of preferred stock since it enjoys a tax advantage over debt.

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Definitions:

Angiosperm

Flowering plants that produce seeds enclosed within a fruit, the largest and most diverse group in the plant kingdom.

Anther

Of a flower, part of the stamen that produces pollen grains.

Filament

A slender, thread-like structure, often part of a larger structure in both biological organisms and man-made materials.

Apical Meristems

Regions located at the tips of roots and shoots in plants, responsible for primary growth and elongation.