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skelet666 [1.2K]
2 years ago
11

LCMS Industries has $70 million in debt outstanding. The firm will pay only interest on this debt (the debt is perpetual). LCMS'

marginal tax rate is 35% and the firm pays a rate of 8% interest on its debt. The present value of LCMS' interest tax shield is closest to:_________
Business
1 answer:
egoroff_w [7]2 years ago
6 0

Answer:

$24.5 million

Explanation:

Calculation for The present value of LCMS' interest tax shield

Using this formula

Present Value of Tax shield = Debt outstanding× Marginal tax rate

Let plug in the formula

Present Value of Tax shield=$70 million× .35

Present Value of Tax shield=$24.5 million

Therefore The present value of LCMS' interest tax shield is closest to: $24.5 million

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