Tucker Enterprises Has $100 000 Worth of Debt Financing and $200 000

Multiple Choice

Tucker Enterprises has $100 000 worth of debt financing and $200 000 in equity financing.This year it paid $8000 in interest on its debt and paid $8000 in dividends to shareholders.Its tax rate is 25%.This suggests which of the following?

A) The dividend payment will increase both taxes and retained earnings.
B) Interest payments will result in a $2000 reduction in its taxes.
C) Neither interest nor dividends will affect the company's taxes because they are both after-tax expenses.
D) The dividend payments will result in an $8000 reduction in its taxes.