Assume That Capital Markets Are Perfect Except for the Existence

question 19

Multiple Choice

Assume that capital markets are perfect except for the existence of corporate taxes and that your firm pays 40% of earnings in taxes.If you want to maintain ownership of at least a 50%,then the minimum amount of debt that you must issue to fund the expansion is closest to:

• A)$19 million
• B)$18 million
• C)$16 million
• D)$20 million

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Definitions:

Capitalist Economy

An economic system where trade, industries, and the means of production are largely or entirely owned and operated by private individuals or businesses aiming for profit.

Diametrically Opposed

Completely opposite or contradictory; indicating two things that are as different from each other as possible.

Conflict Theory

A theoretical framework in sociology that emphasizes the role of power differentials and social conflicts in contributing to social inequality and change.

Inequality

The condition of being unequal in status, rights, opportunities, or wealth, resulting in disparities among individuals or groups.