Multiple Choice
What is the present value of the tax shield to a firm that has total assets of $80 million and a net worth of $55 million, if the average interest rate on perpetual debt is 8.5%, the average return on equity is 14%, and the marginal tax rate is 35%?
A) $8.75 million
B) $12.25 million
C) $0.85 million
D) $0.744 million
Correct Answer:
Verified
Correct Answer:
Verified
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