What Is the Amount of the Annual Interest Tax Shield

question 81

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?

• A)$100,000
• B)$200,000
• C)$300,000
• D)$400,000 Interest tax shield = interest expense x tax rate
• = $5,000,000 x .1 x .40

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Definitions:

NFC

Near Field Communication, a set of communication protocols that enable two electronic devices, one of which is usually a portable device such as a smartphone, to establish communication by bringing them within close proximity.

Protocols

Sets of rules and conventions for communication between network devices, ensuring the transfer of data across networks is consistent and reliable.

BIOS

Basic Input Output System, firmware used to perform hardware initialization during the booting process and to provide runtime services for operating systems and programs.

Boot Sequence

The order of operations that a computer's BIOS follows to load the operating system and other software when the computer is turned on.