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:

Law of Definite Proportions

A chemical law stating that a compound always contains exactly the same proportion of elements by mass.

Dalton's Atomic Theory

A foundational concept in chemistry that asserts elements are composed of tiny, indivisible particles called atoms, and that chemical reactions involve the rearrangement of these atoms.

Rutherford

Refers to Ernest Rutherford, the scientist who proposed the model of the atom with a central nucleus surrounded by electrons.

Alpha Particles

A type of ionizing radiation consisting of two protons and two neutrons, emitted from the nucleus of an atom.