If a Firm Borrows $50 Million for One Year at an Interest

question 49

Multiple Choice

If a firm borrows $50 million for one year at an interest rate of 10 percent, what is the present value of the interest tax shield? Assume a 21 percent marginal corporate tax rate.

• A)$0.95 million
• B)$1.50 million
• C)$1.00 million
• D)$4.55 million

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Definitions:

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