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:

Shared Responsibility

The concept that duties and obligations are distributed among multiple parties, requiring collective action to achieve a common goal.

Cooperation

The act of working together towards a common goal or interest.

Developmental Sequence

The ordered progression through which a system, organism, or organizational process matures or evolves.

Failure

The state or condition of not meeting a desirable or intended objective, and may be viewed as the opposite of success.