Use the Following Information to Answer the Question(s)below

question 55

Multiple Choice

Use the following information to answer the question(s) below.
Google Corporation has no debt on its balance sheet in 2008,but paid $1.6 billion in taxes.Assume that Google's marginal tax rate is 35% and Google's borrowing cost is 7%.
-Assume that investors hold Google stock in retirement accounts that are free from personal taxes.If Google were to issue sufficient debt to reduce its taxes by $1 billion per year permanently,then the value that would be created is closest to:

• A)$14.25 billion.
• B)$22.00 billion.
• C)$24.50 billion.
• D)$40.75 billion.

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Definitions:

Cost Of Goods

The direct costs attributable to the production of the goods sold by a company, including materials and labor but excluding indirect expenses.

Beginning Inventory

The value of a company's inventory at the start of an accounting period.

Production Budget

is a financial plan that estimates the cost of production based on projected product volumes, including costs of materials, labor, and overhead.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated using inventory valuation methods such as FIFO, LIFO, or weighted average.