Which of the Following Is a Reason Why Personal Taxes

question 5

Multiple Choice

Which of the following is a reason why personal taxes tend to favour the use of equity in a firm's capital structure?

• A)Large portion of the returns on equity are taxed at a rate lower than ordinary tax rates.
• B)Dividend payments are not tax deductible for equity holders,and are taxed at the capital gains rate.
• C)Interest income is not tax deductible at the ordinary tax rate which is generally more favourable.
• D)Interest income is tax deductible and leads firms to favour debt over equity financing.

---

Definitions:

Trigeminal

Pertaining to the fifth cranial nerve, which is responsible for sensation in the face and motor functions such as biting and chewing.

Glosspharyngeal

A cranial nerve that supplies motor fibers to the pharynx and tongue, and sensory fibers to the tonsils, pharynx, and middle ear, playing a key role in swallowing and taste.

Oculomotor

Pertaining to the third cranial nerve that controls most of the eye's movements, the constriction of the pupil, and maintains an open eyelid.

Trochlear

Pertaining to the fourth cranial nerve that innervates the superior oblique muscle of the eye, allowing for movement.