What Is the Present Value of the Tax Shields for a Firm

question 102

Multiple Choice

What is the present value of the tax shields for a firm that anticipates a perpetual debt level of $10 million at an interest rate of 7% and a tax rate of 35%?(Use values in dollar.)

• A)$245,000
• B)$700,000
• C)$3,500,000
• D)$10,000,000

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Definitions:

Electric Bill

A monthly statement charging for the consumption of electrical power provided by a utility company.

Total Expenses

The sum of all costs incurred by a business or individual in a specific period.

Total Revenue

The gross income generated from the core business activities of a company, including the sale of products and services.

Liability

Debts or monetary commitments that a firm has to settle with others, requiring the provision of economic benefits such as cash, products, or services over a period.