If a Firm Permanently Borrows $100 Million at an Interest

question 23

Multiple Choice

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

• A)$8 million
• B)$5.60 million
• C)$30 million
• D)$26.67 million

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Definitions:

Deep Brain Stimulation

A neurosurgical procedure involving the implantation of a medical device called a brain pacemaker, which sends electrical impulses to specific parts of the brain.

Electroconvulsive Therapy

A psychiatric treatment in which seizures are electrically induced in patients to provide relief from mental disorders.

Prefrontal Lobotomy

A surgical procedure once used to treat mental disorders, involving the removal or severing of connections to the prefrontal cortex of the brain, now largely discredited due to its severe side effects and ethical issues.

Psychodynamic Therapy

A therapeutic approach that emphasizes unconscious processes and past experiences in shaping current behavior.