What Does the Present Value of the Tax Shield from Debt

question 18

Multiple Choice

What does the present value of the tax shield from debt formula assume?

• A)The interest rate on the debt is less than cost of equity.
• B)The debt will not be replaced when paid.
• C)Interest on the debt is paid only when the debt matures.
• D)The interest is paid semiannually.
• E)The debt is perpetual.

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