Use the Information for the Question(s)below

question 60

Multiple Choice

Use the information for the question(s) below.
Aardvark Industries is considering a project that will generate the following free cash flows: You are also provided with the following market value balance sheet and information regarding Aardvark's cost of capital:
-Suppose that to fund this new project,Aardvark borrows $120 with the principal to be paid in three equal installments at the end each year.The present value of Aardvark's interest tax shield is closest to:

• A)$5.15.
• B)$5.00.
• C)$5.90.
• D)$5.25.

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Definitions:

Expected Value

The weighted average of all possible values a random variable can take on, with the weights being the probabilities of each outcome.

Loan Applications

Formal requests submitted by individuals or businesses to borrow money from financial institutions.

Continuous Random Variable

A variable that can take on an infinite number of values within a given range.

Curve f(x)

A graphical representation of a function f, defined by y = f(x), showing the relationship between two variables x and y.