What Is the Present Value of the Tax Shield to a Firm

question 46

Multiple Choice

What is the present value of the 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 perpetual debt is 8.5%, the average return on equity is 14%, and the marginal tax rate is 35%?

• A) $8.75 million
• B) $12.25 million
• C) $0.85 million
• D) $0.744 million

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Definitions:

Newborns

Infants in the first few weeks of life, highlighting a critical period for growth, feeding, and adaptation outside the womb.

Heat Loss

Heat loss refers to the transfer of body heat to the surrounding environment, which can occur through processes such as radiation, conduction, convection, and evaporation.

Metabolic Rate

The rate at which the body expends energy or burns calories, influencing weight and energy levels, varying according to activity, genetics, and health status.

Restless

The state of being unable to stay still or calm, often due to anxiety, boredom, or other conditions.