Use the Information for the Question(s)below

question 75

Multiple Choice

Use the information for the question(s) below.
LCMS Industries has $70 million in debt outstanding.The firm will pay only interest on this debt (the debt is perpetual) .LCMS' corporate tax rate is 21% and the firm pays a rate of 8% interest on its debt.
-Assuming that the risk of the tax shield is only 6% even though the debt pays 8%,then the present value of LCMS' interest tax shield is closest to:

• A)$24.5 million.
• B)$18 million.
• C)$19.6 million.
• D)$20.0 million.

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Definitions:

Oral Contract

An oral contract is an agreement between two or more parties that is spoken and not written down, yet is legally binding.

Convey the Deed

The act of transferring title of real property from one person or entity to another through a legal document.

Parol Evidence Rule

A rule in contract law that prevents parties from presenting extrinsic evidence of prior or contemporaneous agreements to alter or contradict the terms of a written contract.

Standardized Form Contracts

Contracts that are preprinted and contain set terms and conditions for all parties, typically not negotiable.