Answer:
option (c) $16,800
Step-by-step explanation:
Data provided:
Outstanding debt = $48,000
Coupon rate = 6.75%
The tax rate = 35%
Now,
The present value of tax shield is calculated as:
Value of tax shield = Outstanding debt × tax rate
on substituting the respective values, we have
Value of tax shield = $48,000 × 0.35
or
Value of tax shield = $16,800
Hence, the correct answer is option (c) $16,800