What Is the Amount of the Annual Interest Tax Shield

question 74

Multiple Choice

What is the amount of the annual interest tax shield for a firm with $3 million in debt that pays 12% interest if the firm is in the 35% tax bracket? (Use value in dollar.)

• A)$126,000
• B)$234,000
• C)$360,000
• D)$1,050,000

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Definitions:

Holder in Due Course

A legal term for a party who has acquired a negotiable instrument in good faith and for value, affording them certain protections.

Promissory Note

A financial document in which one party promises to pay another a specific sum of money at a specified time or on demand.

Fraudulent Alteration

The illegal modification of a document or instrument in a manner that changes its legal rights or obligations, intended to deceive or defraud.

Electronic Signatures

Digital forms of a signature used to consent or approve documents and contracts electronically.