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:

Seborrheic Infantile Dermatitis

A common skin condition in infants causing scaly patches, usually on the scalp, known as cradle cap.

Hebra's Pityriasis

An alternative term for Pityriasis Rosea, a skin rash condition of unknown cause featuring a distinctive pattern over the body.

Allergic Dermatitis

Inflammatory skin condition triggered by an allergic reaction to substances or allergens.

Dyes

Substances used to add color to materials, from textiles to biological tissue samples for microscopic examination.