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

question 97

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 25% tax rate on interest income.If Google were to issue sufficient debt to reduce its taxes by $600 million 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:

Essential

Absolutely necessary or extremely important for a particular process, function, or survival.

Life

A characteristic that distinguishes physical entities with biological processes, such as signaling and self-sustaining processes, from those that do not.

Bilateral Symmetry

Body plan in which organs or parts present on both sides of the body are mirror images in appearance. For example, the hands are bilaterally symmetrical, whereas the heart is not.

Advanced Nervous Systems

Highly developed neurological structures that allow for complex behaviors, information processing, and adaptation in organisms.