Eccles Inc

question 79

Multiple Choice

Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
-Refer to the data for Eccles Inc.Assume that the firm's gain from leverage according to the Miller model is $126,667. If the effective personal tax rate on stock income is TS = 20%, what is the implied personal tax rate on debt income?

• A) 16.4%
• B) 18.2%
• C) 20.2%
• D) 22.5%
• E) 25.0%

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Definitions:

Content Conflict

Content Conflict arises from differing viewpoints, opinions, or needs regarding the subject matter or issues at hand, often requiring negotiation or compromise to resolve.

Belief Systems

Complex structures of principles and values that guide behaviors, thoughts, and interactions within societies and individuals.

Sympathetic Listeners

Individuals who listen with empathy and understanding, often providing emotional support through their attentive listening.

Institutionalized Conflict

Conflict that arises within institutions or organizations due to structural imbalances, power dynamics, or differing interests and goals.