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is 1&2,5%) Two firms have the same earnings before interest and taxes of $400,000 and both have a tax rate of 40%, Firm A has $10.000 interest expense whereas firm B has no Interest expense. The two firms' earnings after tax net income is: Mutiple Choice The difference in net income is smaller than that of interest expense due to the tax reduction on interest expense Firm A has higher net income i Firm B has lower tax expense The same
A firm with a 40% tax rate is indifferent between paying $100,000 in interest and $60,000 in common stock dividends because: Multiple Choice the aftertax interest expense equals the dividend payment of $60,000 interest and dividends are of the same nature to the firm the firm cares for the creditors more than the shareholders. the firm cares for the shareholders more than the creditors O