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:

Fiscal Policy

Government policies related to taxation and public spending, aimed at influencing the economy.

Federal Reserve Bank

The central banking system of the United States, which regulates the U.S. money supply and is responsible for monetary policy.

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Environmental changes resulting from human activities that emit greenhouse gases, leading to global warming and altered weather patterns across the globe.

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A sudden and significant increase in the number of crimes in a particular area or country, often causing public concern or panic.