The Interest Tax Shield

question 26

Multiple Choice

The interest tax shield:

• A) does not affect the WACC.
• B) makes it less costly to distribute cash to the security holder through interest payments than through dividends.
• C) is given by D × (1 - t).
• D) b and c.

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Definitions:

Random Variable

A variable whose values depend on outcomes of a random phenomenon, often used in probability and statistics.

Values

Fundamental beliefs or principles that guide behavior and decision-making.

Uncertain

Lacking predictability, certainty, or clarity, often leading to risk or indecision in decision-making processes.

Known Values

Refers to parameters or factors in an equation or scenario that are already specified or determined.