Assume That Five Years Have Passed Since Wyatt Issued This

question 84

Multiple Choice

Assume that five years have passed since Wyatt issued this debt.While tax rates have remained at 40%,interest rates have dropped so that Wyatt's current cost of debt capital is now only 4%.Wyatt's annual interest tax shield is now closest to:

• A)$2.8 million
• B)$4.2 million
• C)$40.0 million
• D)$60.0 million

---

Definitions:

Activity-based Costing

A costing methodology that assigns costs to products or services based on the resources they consume.

First-stage Allocation

The initial process of assigning indirect costs to relevant cost objects or activities, typically in a cost accounting system.

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate picture of the cost to produce a product or service.

First-stage Allocation

The process in cost accounting of assigning overhead costs to various cost pools before they are allocated to products or services.