Suppose a Project Financed Via an Issue of Debt Requires

question 61

Multiple Choice

Suppose a project financed via an issue of debt requires five annual interest payments of $18 million each year. If the tax rate is 35% and the cost of debt is 7%, what is the value of the interest rate tax shield?

• A) $20.66 million
• B) $31.00 million
• C) $25.83 million
• D) $51.66 million

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Definitions:

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