Multiple Choice
Emma Incorporated has EBIT of $875,000 for the current year.The firm has $350,000 of debt outstanding with a coupon rate of 7 percent.Investors require a return of 15 percent on the firm,and the firm has a corporate tax rate of 40%.What is the present value of the firm's tax shields?
A) $ 24,500
B) $350,000
C) $140,000
D) $ 52,500
Correct Answer:
Verified
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