Use the Information for the Question(s) Below

question 42

Multiple Choice

Use the information for the question(s) below.
LCMS Industries has $70 million in debt outstanding. The firm will pay only interest on this debt (the debt is perpetual) . LCMS' marginal tax rate is 35% and the firm pays a rate of 8% interest on its debt.
-Assuming that the risk of the tax shield is only 6% even though the loan pays 8%,then the present value of LCMS' interest tax shield is closest to:

• A) $24.5 million
• B) $18.0 million
• C) $33.0 million
• D) $20.0 million

---

Definitions:

Ingroup-Outgroup Processes

The social dynamics and psychological processes involved in categorizing others as belonging to the same group (ingroup) or a different group (outgroup).

Discontinuity Effect

Refers to the observation that groups often exhibit more extreme behavior, and have a greater frequency of conflict and competition, compared to individuals acting alone.

Unfriendly

Characterized by a lack of friendliness or warmth; often describes behavior that is cold, distant, or hostile.

Embarrassed

A feeling of discomfort or self-consciousness caused by a perceived mistake or inadequacy in front of others.