Suppose That to Fund This New Project,Aardvark Borrows $120 Million

question 56

Multiple Choice

Suppose that to fund this new project,Aardvark borrows $120 million with the principal to be paid in three equal installments at the end each year.The present value of Aardvark's interest tax shield is closest to:

• A) $5.15
• B) $5.00
• C) $5.90
• D) $5.25

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Definitions:

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded in a market, leading to market stability.

Units Of Output

A quantifiable count of the products or goods produced by a company or an industry.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced, decreasing as more is produced.

Short Run

A time period in economics where at least one factor of production is fixed, limiting the ability of businesses to adjust to changing market conditions.