- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 6. Capital Structure
- Subject 1. The Cost of Capital
CFA Practice Question
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
Correct Answer: A
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. |