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

question 69

Multiple Choice

Use the following information to answer the question(s) below.
Wyatt Oil issued $100 million in perpetual debt (at par) with an annual coupon of 7%.Wyatt will pay interest only on this debt.Wyatt's corporate tax rate is expected to be 21% for the foreseeable future.
-Assume that five years have passed since Wyatt issued this debt.While tax rates have remained at 21%,interest rates have dropped so that Wyatt's current cost of debt capital is now only 4%.Wyatt's annual interest tax shield is now closest to:

• A)$1.47 million.
• B)$4.20 million.
• C)$40.0 million.
• D)$60.0 million.

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