Suppose a Project Financed Via an Issue of Debt Requires

question 2

Multiple Choice

Suppose a project financed via an issue of debt requires five annual interest payments of $10 million each year.If the tax rate is 30% and the cost of debt is 6%,what is the value of the interest rate tax shield?

• A)$11.35 million
• B)$12.21 million
• C)$13.20 million
• D)$12.64 million
• E)$15 million

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Definitions:

Complexity

A measure of how intricate, detailed, or complicated an object, system, or process is.

ADDA

American Design Drafting Association, an organization that supports professionals in the drafting and design industry.

Reference Dimension

A measurement provided on a drawing or in a set of specifications for informational purposes only, not subject to inspection.

Diameter

A linear measurement of a circle across the center point from one edge to the opposite edge.