Use the Following Information to Answer the Question(s)below

question 55

Multiple Choice

Use the following information to answer the question(s) below.
Google Corporation has no debt on its balance sheet in 2008,but paid $1.6 billion in taxes.Assume that Google's marginal tax rate is 35% and Google's borrowing cost is 7%.
-Assume that investors hold Google stock in retirement accounts that are free from personal taxes.If Google were to issue sufficient debt to reduce its taxes by $1 billion per year permanently,then the value that would be created is closest to:

• A)$14.25 billion.
• B)$22.00 billion.
• C)$24.50 billion.
• D)$40.75 billion.

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Definitions:

Forklift

A powered industrial truck used for lifting and moving materials over short distances, commonly found in warehouses and manufacturing facilities.

Restrictive Covenant

A private restriction on the use of land. If its benefit or obligation passes with the land’s ownership, it is said to “run with the land.”

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Specific Performance

A legal remedy in contracts law where a court orders a party to perform their obligations under a contract, rather than simply paying damages.