If corporate tax rate is 25% and interest expense is 40, what is the annual tax shield?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Study for the Finance and Investment Challenge Test. Approaches include flashcards and multiple-choice questions with hints and explanations. Ready yourself to ace the exam!

Multiple Choice

If corporate tax rate is 25% and interest expense is 40, what is the annual tax shield?

Explanation:
The annual tax shield comes from the tax deduction on interest expense: tax savings = tax rate × interest expense. With a 25% corporate tax rate and 40 of interest expense, the shield is 0.25 × 40 = 10. So the tax shield is 10 in the given currency units. The other options would reflect different rates or miscalculations, but the 25% rate applied to 40 gives 10.

The annual tax shield comes from the tax deduction on interest expense: tax savings = tax rate × interest expense. With a 25% corporate tax rate and 40 of interest expense, the shield is 0.25 × 40 = 10. So the tax shield is 10 in the given currency units. The other options would reflect different rates or miscalculations, but the 25% rate applied to 40 gives 10.

More Multiple Choice Questions
Subscribe

Get the latest from Passetra

You can unsubscribe at any time. Read our privacy policy