Refer to Exhibit 7A.1.What is the nominal dollar value of the interest tax savings to the firm in the third year of the issue? Do not round your intermediate calculations.

Question

Quizplus · Accepted Answer

The nominal dollar value of the interest tax savings in the third year can be calculated as follows:
Interest payment = 10,000,000 * 12% = 1,200,000
Tax savings = 1,200,000 * 0.33 = 396,000
Therefore, the nominal dollar value of interest tax savings in the third year of the issue is $396,000, which is closest to option C ($39.84) after rounding.