Suppose a Project Financed Via an Issue of Debt Requires

question 65

Multiple Choice

Suppose a project financed via an issue of debt requires six annual interest payments of $20 million each year.If the tax rate is 30% and the cost of debt is 8%,what is the value of the interest rate tax shield?

• A)$31.35 million
• B)$27.74 million
• C)$23.20 million
• D)$32.64 million

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Definitions:

Hydraulic Fracturing

A process used in the oil and gas industry to increase the flow of oil or gas from a well by injecting high-pressure fluid into the surrounding rock.

Fracking

A method of extracting natural gas or oil from the earth by injecting fluid into subterranean rocks at high pressure.

Civil Law

Civil law is a legal system that deals with disputes between private parties, and includes laws such as contracts, torts, and property, distinguishing it from criminal law.

Legal Realism

The school of jurisprudence which dictates that context must be considered as well as law. Context includes factors such as economic conditions and social conditions.