Use the Table for the Question(s)below

question 3

Multiple Choice

Use the table for the question(s) below.
Consider the following historical top federal tax rates in the United States:
Personal Tax Rates
-In 2005,assuming an average dividend payout ratio of 50%,the effective tax advantage for debt (τ*) was closest to:

• A)24%.
• B)18%.
• C)35%.
• D)15%.

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Definitions:

Calls

In finance, refers to an agreement that gives the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

Step-Variable Cost

Costs that remain fixed over a specific range of production or activity, but jump to a higher level once a certain threshold is exceeded.

Fixed Cost

Expenses that do not change with the level of output or sales, such as rent or salaries.

Mixed Cost

Expenses that contain both fixed and variable components and change in total with the level of activity but not proportionately.