Your Firm Has a Bond Issue with a Face Value

question 62

Multiple Choice

Your firm has a bond issue with a face value of $250,000 outstanding.These bonds have a coupon rate of 7 percent,pay interest semiannually,and have a current market price equal to 103 percent of face value.What is the amount of the annual tax shield on debt given a tax rate of 21 percent?

• A)$3,675
• B)$6,309
• C)$4,500
• D)$47,500
• E)$52,500

---

Definitions:

Sherman Antitrust Act

A landmark federal statute in the United States passed in 1890 that prohibits certain business activities that federal government regulators deem to be anti-competitive.

Standard Oil Trust

A historical example of a corporate monopoly in the United States, established by John D. Rockefeller to control oil production and prices.

Corporate Takeovers

The acquisition of one company, called the target company, by another, referred to as the acquiring company.

Financial Defenses

Strategies and measures implemented by individuals, companies, or countries to protect financial assets and income against risks and volatility.