What is the amount of the annual interest tax shield

Assignment Help Financial Management

Reference no: EM131863402

1. Tom’s Kitchen has a $200,000 annual-coupon bond issue outstanding. The bond has a 6 percent coupon rate. The corporate tax rate is 35 percent. What is the amount of the annual interest tax shield?

A. $1,500

B. $2,100

C. $3,500

D. $4,200

E. $4,900

2. Auto Heating Corp. has expected earnings before interest and taxes (EBIT) of $100,000, an unlevered cost of capital of 15 percent. Now, the firm is considering to increase its leverage by issuing a debt of $200,000 to repurchase the stocks. The corporate tax rate is 40 percent. What is the value of the firm after leverage?

A. $350,000

B. $412,250

C. $480,000

D. $525,000

E. $550,250

Reference no: EM131863402

Questions Cloud

Discusses possible strategic alternatives to be implemented : Module 2 and add in a section that discusses possible strategic alternatives to be implemented for your company's international operations.

Make recommendations about the reservation agents : Phoenix Boutique Hotel Group (PBHG) was founded in 2007 by BreeBristowe. Having worked for several luxury resorts, Bristowe decided to pursue her dream.

What is tom effective annual rate : During the year the stock paid dividends of $5.37 per share. What is Tom's effective annual rate?

What is the current price of fidelity corporation stock : Fidelity Corporation has just paid its annual dividend of $5.50, today, and dividends are expected to grow at a rate of 1.5 percent, per year

What is the amount of the annual interest tax shield : Tom’s Kitchen has a $200,000 annual-coupon bond issue outstanding. What is the amount of the annual interest tax shield?

Explain why people so often mimic one another : How might each of these processes function differently in different cultures? Provide examples

What is the cost of debt for malone manufacturing company : What is the cost of debt for Malone Manufacturing Company?

Speculate on two common causes of conflicts in teams : Discuss the techniques in the context of an agile project team environment with various scenarios, and must also demonstrate approaches to turning.

How does socrates conversation with meno : How does Socrates' conversation with Meno illustrate the definition, method, and value of philosophy? Does Chalmers' argument for the imaginability of brains

User Account

All Pages