Although the Value of an Additional Interest Tax Shield May

question 49

Multiple Choice

Although the value of an additional interest tax shield may be positive, firms may restrict borrowing if:

• A)The returns on the project are too high
• B)Their asset base is largely intangible
• C)Their asset beta is zero
• D)The borrowing increases their WACC

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Definitions:

Overpriced

Overpriced indicates that something is valued or offered for sale at a price higher than is considered reasonable or fair in relation to its intrinsic or market value.

Discount

A reduction from the usual cost of an item or service, typically offered to incentivize purchases.

Electrical Generators

Machines that convert mechanical energy into electrical energy for use in an external circuit.

Contract

An accord between two or more parties that is recognizable by law and can be legally enforced.