Asked by
Nayeli Carrillo
on Nov 07, 2024Verified
China Importers has $267,000 of debt outstanding that is selling at par and has a coupon rate of 9.5%. The tax rate is 35%. What is the present value of the tax shield?
A) $8,878
B) $16,487
C) $93,450
D) $148,020
E) $173,550
Coupon Rate
The annual interest rate paid by a bond's issuer to its holders, expressed as a percentage of the bond's face value.
Tax Shield
A reduction in taxable income for individuals or corporations achieved through claiming allowable deductions such as mortgage interest, medical expenses, amortization, and depreciation.
- Determine the present value of a tax shield.
Verified Answer
LW
Learning Objectives
- Determine the present value of a tax shield.
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