Answered: How much debt is outstanding if the…

How much debt is outstanding if the present value of a perpetual tax shield is $350,000, the tax rate is 21% and the interest rate on the debt is 10%? O$300,000 O $1,428,571 O$3.000,000 $1,666,667

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter6: Accounting Periods And Other Taxes

Section: Chapter Questions

Problem 8MCQ

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

How much debt Is outstanding if the present value of
a perpetual tax shield is $350,000, the tax rate is
21% and the interest rate on the debt is 10%?
O $300,000
O$1428,571
O$3.000,000
O$1.666.667

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