Roxy Incorporated Has EBIT of $2 Million for the Current

question 74

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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