Use the Following Information to Answer the Question(s)below

question 71

Multiple Choice

Use the following information to answer the question(s) below.
Google Corporation has no debt on its balance sheet in 2008,but paid $1.6 billion in taxes.Assume that Google's marginal tax rate is 35% and Google's borrowing cost is 7%.
-Assume that investors in Google pay a 15% tax rate on income from equity and a 35% tax rate on interest income.If Google were to issue sufficient debt to reduce its taxes by $1 billion per year permanently,then the effective tax advantage of this debt would be closest to:

• A)10%.
• B)15%.
• C)25%.
• D)30%.

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Definitions:

Anticipatory Pain

The expectation or fear of pain that can occur before an actual painful stimulus is experienced.

Avoidance Behavior

Actions taken to prevent or evade a perceived negative outcome or noxious stimulus.

Escape Behavior

An action taken to terminate an ongoing, unpleasant, aversive stimulus.

Mowrer's Two-Factor Theory

A psychological theory that integrates classical and operant conditioning to explain avoidance learning and the development of phobias.