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:

Consideration

The exchange of something of value in return for the promise or service of another party, a fundamental component of a valid contract.

Promise

A declaration or assurance by one party to another that a particular action or condition will occur or be met, potentially forming the basis of a contractual obligation.

Consideration

Something of value that is promised, given, or done that persuades a party to enter into a contract, making the contract legally enforceable.

Contract

A legally binding agreement between two or more parties that is enforceable by law.