Your Firm Has a $250,000 Bond Issue Outstanding

question 5

Multiple Choice

Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon,pay interest semiannually,and have a current market price equal to 103% of face value. What is the amount of the annual interest tax shield given a tax rate of 35%?

• A) $6,125
• B) $6,309
• C) $9,500
• D) $17,500
• E) $18,025

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