1. When a firm pays tax, MM’s Proposition I no longer holds, and the capital structure of the firm can be important due to the:
A. lower tax rates on dividends than on debt
B. higher tax rates on retained earnings than on debt
C. Interest tax shield
D. higher operating income from lower dividends
2. The monthly payments on a $95,000 loan at 12% annual interest are $1045.95. How much of the first monthly payment will go toward interest?
A) $1140.00 B) $920.44 C) $125.51 D) $950.00