If a Firm Borrows $50 Million for One Year at an Interest

question 25

Multiple Choice

If a firm borrows $50 million for one year at an interest rate of 10%, what is the present value of the interest tax shield? Assume a 30% tax rate. (Approximately.)

• A) $1.364 million
• B) $1.5 million
• C) $1.0 million
• D) $4.545 million
• E) None of the above

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Definitions:

Longitudinal Research

The study of developmental processes by taking repeated measures of the same group of participants at various stages of development.

Mental Abilities

The capacity to perform cognitive tasks, process information, and understand complex ideas.

Cross-Sectional Research

The study of developmental processes by taking measures of participants of different age groups at the same time.

Independent Variable

A condition in a scientific study that is manipulated so that its effects can be observed.