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:

Four Terms

In logic, the fallacy of four terms (quaternio terminorum) occurs when a syllogism has four distinct terms, making it invalid.

Two Dimensions

A term referring to a plane or surface that has length and width, but no depth.

Venn Diagram

A diagram using overlapping circles to visually represent the relationships among sets or groups.

Proposition

An expression or statement that can bear truth-values, serving as a fundamental component in constructing arguments and logical reasoning.