Final answer:
Omega Corp.'s tax shield from its $20 million in perpetual debt with an 8% coupon rate and a 21% tax rate is $336,000, calculated by multiplying the annual interest expense by the tax rate.
Step-by-step explanation:
The tax shield from debt is a benefit that allows corporations to deduct interest payments on their debt from their taxable income, effectively reducing their taxable income and thus their tax liability. To calculate the tax shield, you can multiply the debt amount by the tax rate. In this case, Omega Corp. has $20 million in perpetual debt outstanding and a tax rate of 21 percent. For Omega Corp., which has $20 million in perpetual debt at an 8 percent coupon rate, we can calculate the annual interest expense as $20 million x 0.08 = $1.6 million. Considering the tax rate of 21%, the tax shield from debt would then be $1.6 million x 0.21 = $336,000. Therefore, the correct answer is option C, which is $336,000.