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

question 8

Multiple Choice

If a firm borrows $50 million for one year at an interest rate of 9%, what is the present value of the interest tax shield? Assume a 30% tax rate.

• A) $50.00 million
• B) $17.50 million
• C) $1.445 million
• D) $1.239 million

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Definitions:

Direct Payments

Financial transactions where funds are transferred from one party to another without intermediaries, often used in payroll or benefit disbursement.

Indirect Payments

Payments made on behalf of someone else, often seen in business where employers pay taxes or benefits to governments or insurance companies on behalf of employees.

Benefits and Services

Refers to the perks and support services provided by employers to employees, which can include health insurance, retirement plans, and wellness programs.

Job Evaluations

A systematic process for assessing the relative worth of jobs within an organization to establish a fair and equitable pay structure.