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    Exam 17: Capital Structure: Limits to the Use of Debt
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    An Investment Is Available That Pays a Tax-Free 5
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An Investment Is Available That Pays a Tax-Free 5

Question 41

Question 41

Multiple Choice

An investment is available that pays a tax-free 5%. The corporate tax rate is 25%. Ignoring risk,what is the pre-tax return on taxable bonds?


A) 5%
B) 6.25%
C) 6.67%
D) 7.14%
E) 7.69%.

Correct Answer:

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