For a Firm Paying 5% for New Debt, the Higher

question 15

Multiple Choice

For a firm paying 5% for new debt, the higher the firm's tax rate

• A) the higher the after-tax cost of debt.
• B) the lower the after-tax cost of debt.
• C) the after-tax cost is unchanged.
• D) Not enough information to judge.

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Definitions:

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Land within a city or metropolitan area that is developed or used for buildings, roads, and other structures, contrasting with rural land.

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Bacteria that require oxygen for their growth and survival, playing essential roles in processes such as composting and in the treatment of sewage.

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Organic waste material that reduces oxygen levels in water bodies as microorganisms consume oxygen to decompose this waste.