What is an Interest Tax Shield?

Multiple Choice

An interest tax shield is the cash inflow related to paying less taxes due to the fact that Interest Expense is deductible on the income statement

none of the choices is correct

An interest tax shield is the amount of taxes saved because Depreciation Expense is deductible for tax purposes on the balance sheet

An interest tax shield is a technique used to protect a leveraged firm from paying taxes on interest and dividends

An interest tax shield is the cost paid due to debt on the balance sheet