Suppose a Project Financed Via an Issue of Debt Requires

question 67

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)$13.20 million
• B)$11.35 million
• C)$12.64 million
• D)$12.21 million

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Definitions:

Two-Cycle Engine

An internal combustion engine that completes a power cycle with two strokes of the piston during only one crankshaft revolution.

Ratio

A mathematical expression that represents the relationship between two numbers, showing how many times one value contains or is contained within the other.

Equivalent Ratio

Ratios that express the same relationship between numbers, even though they may look different.

Smallest Term

The term within a mathematical expression, sequence, or series that has the least value.