The interest tax shield is the ________ amount that a firm would have paid in taxes if it did not have leverage.

Question

Quizplus · Accepted Answer

The interest tax shield is the additional amount that a firm would save in taxes due to the deductibility of interest expense for tax purposes. This is calculated by multiplying the company's pre-tax interest expense by the tax rate. Therefore, "additional" is the correct term to use in this context.

The Interest Tax Shield Is the ________ Amount That a Firm