Suppose a Project Financed Via an Issue of Debt Requires

question 48

Multiple Choice

Suppose a project financed via an issue of debt requires five annual interest payments of $12 million each year. If the tax rate is 35% and the cost of debt is 5%, what is the value of the interest rate tax shield?

• A) 14.55 million
• B) $21.82 million
• C) $36.37 million
• D) $18.18 million

---

Definitions:

Fundamental Attribution Error

Overestimates internal factors and underestimates external factors as influences on someone’s behaviour.

Self-Serving Bias

Self-serving bias explains personal success by internal causes and personal failures by external causes.

Performance Appraisal

Is the process of formally evaluating performance and providing feedback to a job holder.

Conflict Resolution

The removal of the substantial and/or emotional reasons for a conflict.