What is the amount of the annual interest tax shield for a firm with $3 million in debt that pays 12% interest if the firm is in the 35% tax bracket? (Use value in dollar.)
A)$126,000
B)$234,000
C)$360,000
D)$1,050,000

Question

Quizplus · Accepted Answer

The annual interest tax shield is calculated as follows:Interest expense = $3 million x 12% = $360,000Tax savings = $360,000 x 35% = $126,000

What Is the Amount of the Annual Interest Tax Shield