The interest tax shield has no value for a firm when the firm is unlevered.

Name: The interest tax shield has no value for a firm when the firm is unlevered.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The interest tax shield refers to the tax savings a company achieves due to the tax-deductibility of interest expenses. If a firm is unlevered, meaning it has no debt, there are no interest expenses to deduct, and therefore, no interest tax shield value.

The Interest Tax Shield Has No Value for a Firm