The After-Tax Cost of Debt Generally Increases When

question 21

Multiple Choice

The after-tax cost of debt generally increases when:
i.a firm's bond rating improves.II.the market-required rate of interest for the company's bonds increases.III.tax rates decrease.IV.bond prices rise.

• A) I and III only
• B) II and III only
• C) I,II,and III only
• D) II,III,and IV only
• E) I,II,III,and IV

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Definitions:

Employer's Payroll Tax

Taxes that employers are required to pay on behalf of their employees, which include social security and Medicare taxes in the United States.

Taxable Earnings

Shows amount of earnings subject to a tax. The tax itself is not shown.

Unemployment Taxes

Taxes paid by employers to fund unemployment insurance programs for workers who lose their jobs.

FIT Payable

Federal Income Tax Payable, a liability account that represents the amount of federal taxes a company or individual owes to the tax authorities.