Suppose that a firm maintains the same amount of debt, $30,000, forever and the interest rate on this debt is 5%. The corporate tax rate is 30%.

What is the annual tax shield?

A.

$300

B.

$350

C.

$400

D.

$450

3 points

QUESTION 15

What is the present value of the interest tax shield?

A.

$8,500

B.

$9,000

C.

$9,500

D.

$10,000

3 points

QUESTION 16

If the firm were 100% financed by equity, this hypothetical unlevered firm would have the value of $50,000. What is this firms actual value?

A.

$45,000

B.

$50,450

C.

$59,000

D.

$65,000

If the firm were 100% financed by equity, this hypothetical unlevered firm would have the value of $50,000. What is this firms actual value?

A.

$45,000

B.

$50,450

C.

$59,000

D.

$65,000