What Is the Amount of the Annual Interest Tax Shield

question 78

Multiple Choice

What is the amount of the annual interest tax shield for a firm with $5 million in debt that pays 10% interest if the firm is in the 40% tax bracket? (Use value in the dollar.)

• A)$100,000
• B)$200,000
• C)$300,000
• D)$400,000

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Definitions:

Religious Fundamentalist

Individuals or groups who strictly adhere to the foundational principles of their faith, often advocating for a literal interpretation and application of religious texts and doctrines.

Carter Doctrine

A foreign policy principle declared by President Jimmy Carter in 1980, stating that the U.S. would use military force if necessary to defend its national interests in the Persian Gulf.

Persian Gulf

A marginal sea of the Indian Ocean located between Iran and the Arabian Peninsula, known for its strategic economic importance due to vast oil reserves.

Military Force

An organization authorized to use lethal or deadly force and weapons to support the interests of the state and its citizens.