If a Firm Permanently Borrows $100 Million at an Interest

question 56

Multiple Choice

If a firm permanently borrows $100 million at an interest rate of 8%,what is the present value of the interest tax shield? (Assume that the marginal corporate tax rate is 30%.)

• A)$8.00 million
• B)$5.60 million
• C)$30.00 million
• D)$26.67 million

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Definitions:

Foreign Investment

The investment of capital from one country into businesses, real estate, or projects within another country, aiming to achieve financial returns.

World System

A viewpoint that emphasizes the global interconnections and dependencies of economies and cultures.

Peripheral Countries

Countries often characterized by their marginal position within the global economic system, typically having less developed economies and depending on core countries for capital.

Raw Materials

The basic material from which a product is made, typically referring to natural resources that are used in production.