Lyme Home has 3,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 8%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 30%?
A) $52,000
B) $60,000
C) $62,500
D) $68,000
E) $72,000

Question

Quizplus · Accepted Answer

The annual interest is 3,000 bonds * $1,000 * 8% = $240,000. The tax shield is $240,000 * 30% = $72,000.

Lyme Home Has 3,000 Bonds Outstanding with a Face Value