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What is the present value of the tax shield to a firm

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Question 1: What is the present value of the tax shield to a firm that has total assets of $80 million and a net worth of $55 million, if the average interest rate on perpetual debt is 8.5%, the average return on equity is 14%, and the marginal tax rate is 35%?

Option 1: $8.75 million

Option 2: $0.85 million

Option 3: $12.25 million

Option 4: $0.744 million

Reference no: EM132513429

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