Suppose a Project Financed Via an Issue of Debt Requires

question 42

Multiple Choice

Suppose a project financed via an issue of debt requires five annual interest payments of $20 million each year.If the tax rate is 30%,and the present value of the interest tax shield is 25.98 million,what is the firm's cost of debt?

• A)3%
• B)4%
• C)5%
• D)6%
• E)7%

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Definitions:

Randomly Chosen

Selected without a specific pattern, order, or reason, ensuring that each member of a set has an equal chance of being included.

Knowledgeable

Having or showing understanding, awareness, or familiarity with facts, information, skills, or subjects through experience or education.

Fundamental Attribution Error

The tendency to overemphasize personality-based explanations for behaviors observed in others while underemphasizing situational explanations.

Collectivist Culture

A cultural orientation that emphasizes the needs, goals, and views of the group over individual desires or motivations.