Consider the M&M world of corporate taxes. The interest expense is $10 million, the corporate tax rate is 20%, and the discount rate on the tax shield is 10%. What is the gain to leverage or the value added from issuing debt?

A) $19 million
B) $20 million
C) $29 million
D) $30 million

Answer: B
Explanation: B) Tax Shield = = = $20 million.

Business

You might also like to view...

Which of the following is the correct sequence of steps in the incident response process?

A. stop attack, repair damage, recognize that a problem exists, learn from the attack B. recognize that a problem exists, stop the attack, repair the damage, learn from the attack C. recognize that a problem exists, repair the damage, stop the attack, learn from the attack

Business

____________________: Information that flows from lower to higher levels in organization's hierarchy

Fill in the blank(s) with the appropriate word(s).

Business