Tucker Enterprises Has $100000 Worth of Debt Financing and $200000

Multiple Choice

Tucker Enterprises has $100000 worth of debt financing and $200000 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 percent. What does this suggest?

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.