In Order to Calculate the Tax Shields Provided by Debt

question 43

Multiple Choice

In order to calculate the tax shields provided by debt, the tax rate used is the

• A)average corporate tax rate.
• B)marginal corporate tax rate.
• C)average of shareholders' equity tax rates.
• D)average of bondholders' personal tax rates.

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Definitions:

Federal Unemployment Tax

A tax paid by employers to fund the federal government's oversight of the state unemployment insurance programs.

Copy A

This term is often associated with tax forms, where Copy A is the official part of a form sent to a tax authority, like the IRS, detailing financial information.

Form W-2

A tax form used in the United States to report wages paid to employees and the taxes withheld from them.

Wages

Compensation received by employees for services performed, usually based on hours worked or a fixed salary.