If a Firm Permanently Borrows $100 Million at an Interest

question 63

Multiple Choice

If a firm permanently borrows $100 million at an interest rate of 8%, what is the present value of the interest tax shield? (Assume that the tax rate is 30%)

• A) $8.00 million
• B) $5.6 million
• C) $30 million
• D) $26.67 million
• E) None of the above
• PV of interest tax shield = (0.3)(100) = $30 million

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