Ernie's Has 4,200 Bonds Outstanding with a Face Value of $1,000

question 14

Multiple Choice

Ernie's has 4,200 bonds outstanding with a face value of $1,000 each,a market value of $1,060 each,and a coupon rate of 7.6 percent.What is the amount of the annual interest tax shield if the tax rate is 35 percent?

• A)$118,423
• B)$99,714
• C)$100,780
• D)$111,720
• E)$102,250

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Definitions:

Fabricating

The process of creating something by assembling or combining various components, often used in manufacturing and industrial contexts.

Setting Up

Setting up refers to the process involved in preparing machinery, equipment, or software to perform its intended task.

Overhead Cost

Indirect costs required for production that cannot be directly traced to specific products, such as utilities, rent, and administrative expenses.

Activity-Based Costing

A detailed approach to determining the cost of a product or service by attributing overhead costs based on each product's activities.