1. What is the amount of the annual interest tax shield for a firm with $24 million in debt that pays 8% interest if the firm is in the 30% tax bracket?
$1,920,000
$1,344,000
$576,000
2. An implicit cost of adding debt to the capital structure is that it:
Decreases the required return on equity
Leaves the required return on equity unchanged
Increases the required return on equity