Which of the Following Statements Is FALSE

question 12

Multiple Choice

Which of the following statements is FALSE?

• A)The equivalent after-tax interest rate is r - (τ × r).
• B)Interest rates vary based on the identity of the borrower.
• C)The ability to deduct the interest expense increases the effective after-tax interest rate paid on the loan.
• D)For loans to borrowers other than the U.S.Treasury,the stated interest rate is the maximum amount that investors will receive.

Comprehend the factors affecting earnings per share and price/earnings ratio.

Recognize the impact of external factors on investment evaluation and company performance.

Discern the use of asset, liability, and equity ratios in evaluating company efficiency.

Understand the impact of transactions on financial ratios.

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Definitions:

Marginal Tax Rate

This represents the percentage of tax applied to an individual's or corporation's last dollar of income, indicating the tax impact on incremental income.

Net Income

After accounting for all costs and paying taxes, the remaining revenue that constitutes a company's profit.

Marginal Tax Rates

The rate at which your last dollar of income is taxed, representing the percentage of tax applied to your income for each tax bracket in which you qualify.

Eligible Dividends

Dividends designated by a corporation to be eligible for a reduced tax rate in the hands of individual Canadian shareholders.