-The Interest Tax Shield Is Equal To:
A)$0
B)(EBIT -

question 39

Multiple Choice

$\begin{array}{c}\begin{array}{|l|}\hline \\\hline \\ \hline \text {Anticipated operating income }\\ \hline \text {Interest}\\ \hline \text {Earnings before tax}\\ \hline \text {Tax at 30 \% }\\ \hline \text {Earnings after tax}\\\hline \\ \hline \text {Combined debt and equity income }\\ \text {(interest plus earnings after tax) }\\ \hline \end{array}\begin{array}{l|} \hline \text {ALL EQUTTY}\\ \hline \\ \hline \$ 1,000,000 \\\hline\underline{\quad\quad}\\ \hline\$1,00,000\\ \hline\underline{\$300,000}\\ \hline \$ 700,000 \\ \hline\\ \hline\\\$700,000\\ \hline\end{array}\begin{array}{l|} \hline \text {EQUITY AND DEBT}\\\hline\\\hline\$ 1,000,000 \\\hline\underline{\$ 200,000} \\\hline\$ 800,000 \\\hline\underline{\$-}\\\hline\$\\\hline\\\hline\\\$\\\hline\end{array}\end{array}$
-The interest tax shield is equal to:

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Definitions:

Opportunity Cost

The act of losing potential rewards from other options upon the selection of a specific alternative.

Investment Line

A graphical representation showing the relationship between the level of investment and the rate of return or interest rate.

Income Axis

The vertical axis on a graph that represents different levels of income, commonly used in economics.

Vertical Axis

In a graph or chart, this is the y-axis, which typically shows the range of values for a dependent variable.