{"id":48283,"date":"2024-04-15T22:39:00","date_gmt":"2024-04-15T22:39:00","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=48283"},"modified":"2024-04-15T22:39:00","modified_gmt":"2024-04-15T22:39:00","slug":"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","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/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\/","title":{"rendered":"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:"},"content":{"rendered":"

[amp_mcq option1=”r \u00c3\u0097 D \u00c3\u0097 t” option2=”r \u00c3\u0097 D” option3=”D \u00c3\u0097 t” option4=”$$\\frac{{\\text{D} \\times \\text{r}}}{{\\text{l} – \\text{t}}}$$” correct=”option3″]<\/p>\n

The correct answer is $\\frac{{\\text{D} \\times \\text{r}}}{{\\text{l} – \\text{t}}}$.<\/p>\n

In the MM Model with taxes, the present value of tax shields is equal to the present value of the interest tax shield, which is equal to the product of the debt, the interest rate, and the tax rate, divided by the discount rate, which is equal to the interest rate minus the tax rate.<\/p>\n

Option A is incorrect because it does not take into account the discount rate. Option B is incorrect because it does not take into account the tax rate. Option C is incorrect because it does not take into account the interest rate.<\/p>\n","protected":false},"excerpt":{"rendered":"

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