Now suppose that the corporate tax rate is Tc = .35. Demonstrate that when River Cruises borrows

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Now suppose that the corporate tax rate is Tc = .35. Demonstrate that when River Cruises borrows the $250,000, the combined after-tax income of its debt-holders and equity-holders increases (compared to all-equity financing) by 35% of the firm's interest expense regardless of the state of the economy.
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Fundamentals of Corporate Finance

ISBN: 978-1259024962

6th Canadian edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim

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