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

question 20

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 $600 million per year permanently,then the amount that Google needs to borrow is closest to:

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

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Definitions:

Variable Expenses

Costs that vary in total in direct proportion to changes in an activity level or volume, such as materials and labor costs.

Fixed Expenses

Expenses that remain constant regardless of the amount of goods produced or sold, including items like rent, salaries, and insurance costs.

Unit Sales

The measurement of the number of individual items or units sold by a company.

Monthly Target Profit

The specific amount of profit a company aims to achieve within a month.