1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
lubasha [3.4K]
2 years ago
15

Arnell Industries has $35 million in permanent debt outstanding. The firm will pay interest only on this debt. Arnell’s marginal

tax rate is expected to be 21% for the foreseeable future. a) Suppose Arnell pays interest of 7% per year on its debt. What is its annual interest tax shield? b) What is the present value of the interest tax shield, assuming its risk is the same as the loan?
Business
1 answer:
Bas_tet [7]2 years ago
3 0

Answer:

a) $0.5145 million

b) $7.35 million

Explanation:

Given:

Permanent debt outstanding = $35,000,000

Expected marginal tax rate = 21%

a) Suppose they pay an interest of 7% per year on debt. Find the annual interest tax shield.

To find annual interes tax shield use the formula below:

Annual interest tax​ shield =Total par value of Debt × interest rate × tax rate

= $35,000,000 × 7% × 21%

= $35,000,000 × 0.07 × 0.21

= $514,500

Annual interest tax​ shield = $0.5145 million

b) What is the present value of the interest tax shield, assuming its risk is the same as the loan?

Use the formula:

Present value of the interest tax​ shield = Annual interest tax​ shield /loan interest rate

= $514,500 / 7%

= $7,350,000

present value of the interest tax​ shield = $7.35 million

You might be interested in
Points represent
Burka [1]

D. Monthly payments

8 0
3 years ago
Apr. 2 Purchased $6,900 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shippin
ziro4ka [17]

Answer:

Apr. 2

Merchandise $6,900 (debit)

Accounts Payable : Lyon Company $6,900 (credit)

<em>Purchased Merchandise from Lyon Company on credit</em>

April 3.

Accounts Payable : Lyon Company $390 (debit)

Cash $390 (credit)

<em>Payment of Freight Charges Include in Invoice (FOB)</em>

April 4.

Accounts Payable : Lyon Company $500 (debit)

Merchandise $500 (credit)

<em>Returned Merchandise to Lyon Company</em>

April 17.

Accounts Payable : Lyon Company $6,010 (debit)

Discount Received $120 (credit)

Cash $5,890 (credit)

<em>Payment of amount due to Lyon Company and discount received</em>

April 18.

Merchandise $13,100  (debit)

Accounts Payable: Frist Corp $13,100  (credit)

<em>Purchased Merchandise on credit from Frist Corp</em>

April 2.

Accounts Payable: Frist Corp $400  (debit)

Purchase allowance $400 (credit)

<em>Received and allowance from Frist Corp</em>

April 28.

Accounts Payable: Frist Corp $12,700 (debit)

Discount Received $127 (credit)

Cash $12,573 (credit)

<em>Payment of amount due to Frist Corp and discount received</em>

Explanation:

See the journals and their narrations prepared above.

7 0
2 years ago
How much taxes you pay on a 100k salary in new york state?
Xelga [282]
A lot more than 100k I believe
5 0
2 years ago
HEY IS THIS THING ON
fgiga [73]

Answer:SID THE SCIENCE KID

Explanation:

6 0
2 years ago
Read 2 more answers
A form of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar prod
Sergio [31]

Answer:

c. foreign subsidiary

Explanation:

Foreign subsidiary -

It refers to a company which is partially or completely , part of some large firm , whose main office is located in some other country , is referred to as a foreign subsidiary .

It is a form of foreign direct investment method , where a company purchases any other company , where the company supposed to manufacture , sell or produce the same type of goods and services .

Hence, from the given information of the question,

The correct option is c. foreign subsidiary .

5 0
3 years ago
Other questions:
  • In the construction of a new housing development, which factor of production can be categorized as land?
    8·1 answer
  • Today, when a customer orders merchandise from an online vendor, the vendor usually sends an immediate order confirmation messag
    8·1 answer
  • Owen Cartwright has joined a real estate syndicate that bought an office building in downtown Orlando, Florida. What type of inv
    10·2 answers
  • IF YOU HELP ILL DO ANYTHING!! 20 POINTS AND BRAINLIEST!!
    7·2 answers
  • Carly is a manager at a business. when she has a job opening, she regularly does internet searches on the applicants to see if t
    14·1 answer
  • On January 1, 2021, Red Flash Photography had the following balances: Cash, $19,000; Supplies, $8,700; Land, $67,000; Deferred R
    5·1 answer
  • Harry's Co. recently implemented an activity-based costing system. As a result of the ABC allocations, the cost of one of the co
    5·1 answer
  • Tanouye Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Ho
    8·1 answer
  • On December 31, 2020, Dow Steel Corporation had 610,000 shares of common stock and 31,000 shares of 9%, noncumulative, nonconver
    7·1 answer
  • What is the role of mining in a business​
    9·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!