Suppose a Project Financed Via an Issue of Debt Requires

question 48

Multiple Choice

Suppose a project financed via an issue of debt requires five annual interest payments of $12 million each year. If the tax rate is 35% and the cost of debt is 5%, what is the value of the interest rate tax shield?

• A) 14.55 million
• B) $21.82 million
• C) $36.37 million
• D) $18.18 million

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Definitions:

Minerals

Naturally occurring inorganic substances with a definite chemical composition and, usually, a distinct crystalline form.

Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.

Trade Fixtures

Items attached to a rented space or building by a tenant, used in conducting business, that can typically be removed upon lease termination.

Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature.