What Is the Annual Tax Shield to a Firm That

question 16

Multiple Choice

What is the annual tax shield to a firm that has total assets of $80 million and a net worth of $55 million, if the average interest rate on debt is 8.5%, the average return on equity is 14%, and the marginal tax rate is 35%?

• A) $2.125 million
• B) $1.87 million
• C) $0.85 million
• D) $0.744 million

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Definitions:

Create Needs

The marketing strategy of generating new desires or needs among consumers for products or services they may not have previously considered.

Consumer Researcher

A professional who studies the behavior, preferences, and trends of consumers in order to better understand and predict their purchasing decisions.

Interests And Values

Personal preferences and core principles that influence individual behavior and decision-making.

Differentiating Products

The process of distinguishing a product or service from others, to make it more attractive to a specific target market.