Gargoyle Unlimited Gargoyle Unlimited Is Planning to Issue a Zero Coupon Bond

question 32

Multiple Choice

Gargoyle Unlimited
Gargoyle Unlimited is planning to issue a zero coupon bond to fund a project that will yield its first positive cash flow in three years. That cash flow will be sufficient to pay off the entire debt issue. The bond's par value will be $1,000, it will mature in 3 years, and it will sell in the market for $727.25. The firm's marginal tax rate is 40 percent.
-Refer to Gargoyle Unlimited.What is the dollar value of the interest tax savings to the firm in the third year of the issue?

• A) $32.58
• B) $40.29
• C) $100.72
• D) $60.43
• E) $109.10

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Definitions:

Political Barrier

Obstructions or hindrances to international trade or domestic business operations caused by political decisions, policies, or conditions.

Sustainability Efforts

Initiatives aimed at promoting environmentally responsible and economically viable practices in business operations.

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The commitment of political leaders to undertake and complete policies or measures that are necessary but potentially unpopular.

CSR Initiatives

Corporate Social Responsibility initiatives are actions taken by businesses to improve society or the environment beyond what is required by law.