A Firm Has Interest Expense of $3 500 Each Year

question 66

Multiple Choice

A firm has interest expense of $3 500 each year for 10 years. If the tax rate is 35% and the discount rate is 8%, compute the value of the interest rate tax shield.

• A)$8 220
• B)$7 091
• C)$7 514
• D)$8 716

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Definitions:

Corporate Officers

Executives or high-ranking officials within a corporation who are given authority to make decisions and oversee the day-to-day operations and strategic planning of the company.

Robinson-Patman Act

U.S. federal legislation that forbids producers from engaging in practices that prevent fair competition, especially through price discrimination.

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider.

Raw Materials

Basic substances or components that are used in the production of goods or finished products.