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:

North Africa

North Africa is a region on the African continent comprising countries along the Mediterranean coast, including Egypt, Libya, Tunisia, Algeria, and Morocco.

Treason

The crime of betraying one's country, particularly by attempting to kill the sovereign or overthrow the government.

Burr

A reference to Aaron Burr, the third Vice President of the United States, known for killing Alexander Hamilton in a duel and for his controversial political career.