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Basic Question 13 of 14
Nature's Plan Inc. has 10,000 bonds outstanding, each with a face value of $1,000 and a coupon payment of $55 every six months. If the corporate tax rate is 34%, what is the interest tax shield each year?
B. $976,000
C. $187,000
A. $374,000
B. $976,000
C. $187,000
User Contributed Comments 5
| User | Comment |
|---|---|
| nhla | Coupon payment for the year is 55*2 = 110 (110*10000)*0.34=374,000 |
| sarath | Tax shield means tax rebate... |
| johntan1979 | Thanks nhla and sarath! |
| schweitzdm | Thanks for the explanation nhla & sarath |
| cfastudypl | good job nhla and sarath, well done guys. |
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
calculate and interpret the weighted-average cost of capital for a company
CFA® 2025 Level I Curriculum, Volume 2, Module 6.