Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield?    A.  $2,800   B.  $3,000   C.  $3,400   D.  $3,800   E.  $7.000

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
Problem 14P
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Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield? 
 

A. 

$2,800

 

B. 

$3,000

 

C. 

$3,400

 

D. 

$3,800

 

E. 

$7.000

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