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

question 44

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
• PV of interest tax shield = ((0.3)(50)(0.1))/1.1 = $1.364

Determine the effect of issuing and repurchasing stock on the statement of cash flows.

Calculate the cash paid for dividends and the effects of dividends declared but not yet paid.

Recognize noncash investing and financing activities and their disclosure.

Correctly classify the sale and purchase of investments and their impact on cash flow.

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Definitions:

Overpopulation

Overpopulation is a condition where an organism's numbers exceed the carrying capacity of its habitat, leading to environmental degradation and diminished quality of life.

Territoriality

The tendency to stake out an area and a willingness to defend that area from intruders.

Individual Good-Collective

The concept that individual welfare or happiness contributes to the overall good or welfare of the community or society.

Water Shortage

A situation in which the available water supply is insufficient to meet the needs of the population, often leading to serious environmental and social consequences.