If a Firm Permanently Borrows $50 Million at an Interest

question 71

Multiple Choice

If a firm permanently borrows $50 million at an interest rate of 10 percent, what is the present value of the interest tax shield? Assume a 30 percent marginal corporate tax rate.

• A)$50 million
• B)$25 million
• C)$15 million
• D)$1.5 million

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Definitions:

Working Memory

A cognitive system responsible for temporarily holding information available for processing.

Focus

The concentration of attention or energy on something specific.

Attention

The behavioral and cognitive process of selectively concentrating on one aspect of the environment while ignoring other things.

Eye-hand Coordination

The synchronized control of eye movement with hand movement, enabling tasks such as catching, throwing, and precise manipulation.