Which of the Following Statements Is CORRECT

question 7

Multiple Choice

Which of the following statements is CORRECT?

• A) Since companies can deduct dividends paid but not interest paid,our tax system favors the use of equity financing over debt financing,and this causes companies' debt ratios to be lower than they would be if interest and dividends were both deductible.
• B) Interest paid to an individual is counted as income for federal tax purposes and taxed at the individual's regular tax rate,which in 2018 could go up to 37%,but qualified dividends received are taxed at a maximum rate of 15% for most individuals.
• C) The maximum federal tax rate on corporate income in 2018 was 50%.
• D) Corporations obtain capital for use in their operations by borrowing and by raising equity capital,either by selling new common stock or by retaining earnings.The cost of debt capital is the interest paid on the debt,and the cost of the equity is the dividends paid on the stock.Both of these costs are deductible from income when calculating income for tax purposes.
• E) The maximum federal tax rate on personal income in 2018 was 50%.

---

Definitions:

Large Veins

Large veins are blood vessels that carry deoxygenated blood toward the heart, excluding the pulmonary and umbilical veins.

Systemic Circuit

The part of the cardiovascular system that carries oxygenated blood away from the heart to the body and returns deoxygenated blood back to the heart.

Pulmonary Circuit

The part of the circulatory system that carries deoxygenated blood from the heart to the lungs for oxygenation, and returns oxygenated blood back to the heart.

Arteries

Blood vessels that carry oxygen-rich blood away from the heart to the body.