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An entity in a 40% tax bracket needs <List A> of operating income to pay 1 of interest and <List B> of pretax income to pay 1 of dividends.
A. Option C
B. Option B
C. Option D
D. Option A
Answer: A
Explanation:
Interest is deductible from operating income to obtain taxable income but dividends are not. Thus, only 1.00 of pretax income is needed to pay 1.00 of interest, but 1.67 of pretax income [1.00 - 1.0 - 4)] is needed to pay 1.00 of dividends if the entity is in a 40% tax bracket.
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D. T Use Provisioned IOPs EBS
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