What Is the Amount of the Annual Interest Tax Shield

question 17

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?

• A)$126,000
• B)$234,000
• C)$360,000
• D)$1,050,000 Interest tax shield = interest expense x tax rate
• = $360,000 x .35

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Definitions:

Optimal Point

The most favorable condition or level for growth, yield, or efficiency.

Motivation

The psychological processes that arouse and direct goal-directed behavior, stemming from internal or external factors.

Intrinsic Motivation

refers to the internal drive to engage in an activity for its own sake, deriving satisfaction and fulfillment from the activity itself rather than from external rewards or pressures.

Nature

The influence of our inherited characteristics on our personality, physical growth, intellectual growth, and social interactions.