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:

Nation Building

Efforts aimed at developing a national identity, cohesive society, and effective state institutions, often after conflict or during states of transition.

Separatist Movements

Groups or entities that seek to gain greater autonomy or independence from a larger political or governmental body.

Transportation Networks

Systems consisting of different modes of transport, infrastructure, and services that facilitate the movement of people and goods.

Transnational Communities

Social groups whose identity, culture, and social ties extend across the borders of two or more nations, often maintained through regular communication and travel.