Roxy Incorporated Has EBIT of $2 Million for the Current

question 69

Multiple Choice

Roxy Incorporated has EBIT of $2 million for the current year.The firm has $5 million of debt outstanding with a coupon rate of 8 percent.Investors require a return of 15 percent on the firm,and the firm has a corporate tax rate of 40%.What is the present value of the firm's tax shields?

• A) $2,000,000
• B) $ 400,000
• C) $ 800,000
• D) $ 750,000

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Definitions:

Cystic Fibrosis

A genetic disease affecting the lungs and digestive system, characterized by thick, sticky mucus leading to infections and digestion problems.

Mucus Thickens

A condition where the mucus becomes more viscous, often leading to congestion and difficulty in breathing or clearing passages.

Meconium Ileus

A blockage of the small intestines caused by thick, sticky meconium in newborn babies, often associated with cystic fibrosis.

Cystic Fibrosis

A genetic disorder that affects the lungs, pancreas, and other organs, leading to thick sticky mucus production, which causes respiratory and digestive problems.