DLTuckers Has $21,000 of Debt Outstanding That Is Selling at Par

question 41

Multiple Choice

D.L.Tuckers has $21,000 of debt outstanding that is selling at par and has a coupon rate of 7.5 percent.The tax rate is 32 percent.What is the present value of the tax shield?

• A)$504
• B)$615
• C)$644
• D)$6,200
• E)$6,720

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Definitions:

Federal Tax Withheld

The portion of an employee's paycheck that is taken by the employer and sent directly to the federal government as partial payment of income tax.

Tax Refund

The reimbursement of excess taxes paid by a taxpayer to the government over the course of the tax year.

Adjusted Gross Income

An individual's total gross income minus specific deductions allowed by the IRS, used to calculate taxable income.

1099 Forms

Documents used to report various types of income other than wages, salaries, and tips to the IRS.