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

question 38

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 in Google pay a 15% tax rate on income from equity and a 35% tax rate on interest income.If Google were to issue sufficient debt to reduce its corporate taxes by $1 billion per year permanently,then the value that would be created is closest to:

• A)$6.4 billion.
• B)$8.6 billion.
• C)$9.8 billion.
• D)$14.3 billion.

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Definitions:

Simulation

A technique used for experimenting with real-world systems or processes in a virtual environment to study their behavior under various conditions.

Mathematical Equations

Symbolic representations of relationships between variables or quantities that are used to solve problems and express basic principles in numerous disciplines.

Internal Human Resource Supply

Assessment of the current employees' capabilities and potential to meet the future HR needs of an organization.

External Supply

The resources or workforce a company hires or acquires from outside its existing operations to fulfill its needs.