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Fudgin [204]
2 years ago
11

Suppose a project financed via an issue of debt requires six annual interest payments of $20 million each year. If the tax rate

is 21% and the cost of debt is 6%, what is the value of the interest rate tax shield
Business
1 answer:
pochemuha2 years ago
5 0

Answer:

$4,200,000

Explanation:

Given :

Annual interest payment = $20 million

Tax rate = 21%

Cost of debt = 6%

The value of the interest rate tax shield is given by :

The tax rate * annual interest payment

Tax rate = 21% = 21/100 = 0.21

Annual interest payment = $20,000,000

The value of interest rate tax shield = (0.21 * $20,000,000) = $4,200,000

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MA_775_DIABLO [31]

Answer: Income statement $100,000

Balance sheet warranty liability $Nill

Explanation:

Since we are at the end of the period and all activities has been concluded with no expectation of claim of repairs. The firm will only record the cost incurred for current period on repairs which is $100,00 ( $100*1000) . The liability will be zero since the company has taken care of all repairs for the period.

3 0
3 years ago
The present value of a future amount of money is the amount ​that, if invested​ today, will grow to be as large as that ​ _____
svetlana [45]

Answer: A. Present; B. Taken; C. Future; D. Present

Explanation:

The present value of a future amount of money is the amount ​that, if invested​ today, will grow to be as large as that ​present amount when the interest that it will earn is​ taken into account.

The calculation that we use to convert a​ future amount of money to its​ present value is called discounting.

8 0
3 years ago
Why do interest rates follow the business cycle?During a recession, the demand for goods and services is lower, businesses borro
MArishka [77]

Answer:

The correct answer is letter "C": Interest rates tend rise during economic expansion and decline during recessions.

Explanation:

The expansion is the period of the economy that represents grow. Because of the prosperity atmosphere, people and businessmen request loans frequently pushing central banks and governmental entities to raise the interest rates to slow down the economy to prevent a recession. The recession itself is the period where the economy is contracted or reduced. In this case, the central banks and governmental entities decrease the interest rates to stimuli economy through loans and purchases.

6 0
3 years ago
Gerald Murphy is a manager at Wright & Wayner, a publishing house which is a very employee-friendly company. The demarcation
Alecsey [184]

Answer:

E) Social Loafing

Explanation:

social loafing is the phenomenon of a person who exerts less effort to achieve a goal when working in a group than when working alone

3 0
2 years ago
If a​ one-year discount bond that pays $1,000 at​ maturity, is held for the entire​ year, and the purchase price is ​$965, then
denis23 [38]

Answer:

3.6%

Explanation:

965x = 1000

x = 1.03626

That’s an interest rate of 3.6%.

6 0
2 years ago
Read 2 more answers
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