Use the Information for the Question(s)below

question 60

Multiple Choice

Use the information for the question(s) below.
Aardvark Industries is considering a project that will generate the following free cash flows: You are also provided with the following market value balance sheet and information regarding Aardvark's cost of capital:
-Suppose that to fund this new project,Aardvark borrows $120 with the principal to be paid in three equal installments at the end each year.The present value of Aardvark's interest tax shield is closest to:

• A)$5.15.
• B)$5.00.
• C)$5.90.
• D)$5.25.

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Definitions:

Long-Term Contracts

Agreements between parties for the supply of goods, services, or employment that extend over a long period.

Quantity of Output

Relates to the total amount of goods or services produced by a firm, industry, or economy within a specific time period.

Expected Price Level

The anticipation or forecast of the average level of prices of goods and services in the economy in the future.

Short-Run Aggregate Supply

Short-Run Aggregate Supply represents the total production of goods and services in an economy at a specific time, considering variable production costs and fixed capital.