A Firm Has Perpetual Debt of $10 Million at an Interest

question 89

Multiple Choice

A firm has perpetual debt of $10 million at an interest rate of 7%.What is the present value of the interest tax shield if the tax rate is 35%?

• A) $245,000
• B) $700,000
• C) $3,500,000
• D) $10,000,000

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Definitions:

Sugars

Carbohydrates that are sweet to taste, soluble in water, and used as a source of energy by living organisms.

Hundreds-Thousands

A numerical range indicating quantities or counts from 100 to 999, often used to describe approximate figures.

Carbohydrate

Organic compounds consisting of carbon, hydrogen, and oxygen, serving as a major energy source in the diet of animals and humans.

Polymer

Long molecules made up of repeating units called monomers, found in numerous natural and synthetic materials.