You Need to Calculate the Gains from Using $1,000,000 of Additional

question 31

Multiple Choice

You need to calculate the gains from using $1,000,000 of additional leverage on the average company in the U.S.economy.You are told that the average investor's personal tax rate on income from stock is 15% and that investors can generally avoid personal taxes on income from debt.You are also told that the average corporation is subject to the 35% marginal corporate tax rate.What is the benefit to firm value for this additional debt load?

• A) $650,000
• B) $447,500
• C) $350,000
• D) none of the above

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Definitions:

Small Bore

Refers to tubes of a smaller diameter, often used in medical contexts for fine, precise procedures or administrations.

Ileostomy

A surgical procedure where the ileum part of the small intestine is brought through the abdominal wall to create a stoma for waste to exit the body bypassing the colon.

Diet Recommendation

Guided nutritional advice tailored to an individual's health, fitness goals, or medical conditions to promote overall well-being and specific health outcomes.

Orange Juice

A liquid extract of the orange tree fruit, high in vitamin C and other nutrients, often consumed as a beverage.