Salinas Corporation Has Net Income of $15 Million Per Year

Multiple Choice

Salinas Corporation has net income of $15 million per year on net sales of $90 million per year.It currently has no long-term debt,but is considering a debt issue of $20 million.The interest rate on the debt would be 7%.Salinas Corp.currently faces an effective tax rate of 40%.What would be the annual interest tax shield to Salinas Corp.if it goes through with the debt issuance?

A) $560,000
B) $1,400,000
C) $8,000,000
D) $20,000,000