In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is tax rate, then present valued shields would be:

Related MCQs

• If the weighting of equity in total capital is 1/3, that of debt is 2/3, the return on equity is 15% that of debt is 10% and the corporate tax rate is 32%, what is the Weighted Average Cost of Capital (WACC)?
• The type of debt whose rate of interest changes according to the changes in the rate of interest payable on gilt edged securities or the prime lending rate of the bank is called
• The cost of debt capital if interest rate is 15% and tax rate is 40% is
• Debt to Total Assets of a firm is .2. The Debt to Equity boo would be:
• Consider the below mentioned statements: 1. A debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company can raise 2 units of debt. 2. The cost of floating a debt is greater than the cost of floating an equity issue. State True or False:
• A company has earnings before interest and taxes of Rs1,00,000. It expects a return on investment at a rate of 12.5%. What is the total value of the firm according to MM Theory?
• Debt-to-total assets (D/TA) ratio is .4. What is its debt-to-equity (D/E) ratio?
• Axis Ltd is issuing 15% debentures ( face value Rs60). The net amount realized per debenture is Rs54 and they are redeemable at par after 6 years. At a corporate tax rate of 40%, what is the cost of debt?
• In case of Net Income Approach, when the debt proportion is increased, the cost of debt:
• XLtd has taken a term loan of Rs12 lakhs at an interest rate of 15% p.a. If the tax rate applicable to the company is 40%, the cost of term loan is