Which of the Following Statements Is CORRECT

question 35

Multiple Choice

Which of the following statements is CORRECT?

• A) The maximum federal tax rate on personal income in 2014 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 2014 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 2014 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:

Online Movie Distributors

Companies that provide movies over the internet, allowing users to stream or download films legally.

Online Content

Digital information available through the internet, including articles, videos, and social media posts.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price point.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price level.