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:

Duty To Pay

The legal obligation of a debtor to settle a debt or fulfill a contractual monetary obligation.

An Assignment

is the transfer of rights, property, or obligations from one party to another, typically involving contractual agreements or legal rights.

Abandonment

Behavior in which a tenant moves out of a leased premises before the end of the term and discontinues making rent payments.

Surrender

The act of voluntarily giving up a right, position, or property, often used in insurance and lease agreements.