If a Firm Borrows $50 Million for One Year at an Interest

question 14

Multiple Choice

If a firm borrows $50 million for one year at an interest rate of 9 percent, what is the present value of the interest tax shield? Assume a 30 percent marginal corporate tax rate.

• A)$50 million
• B)$17.50 million
• C)$1.45 million
• D)$1.24 million

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Definitions:

High Pressure Pump

A pump designed to operate at high pressures, commonly used in various industrial processes, including water treatment, hydraulic systems, and in the oil and gas industry.

Preventive Maintenance

Routine maintenance and inspections to prevent potential failures or breakdowns of equipment.

Useful Life

The estimated period of time over which an asset is expected to be used before it is fully depreciated.

Selling Price

The amount a customer pays to purchase a product or service.