How does the relative tax advantage change

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Reference no: EM13201801

What is the relative tax advantage of corporate debt if the corporate tax rate is Tc = .35, the personal tax rate is Tp = .35, but all equity income is received as capital gains and escapes tax entirely (TpE = 0)? How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 15%?

Reference no: EM13201801

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