Suppose a firm has $ 10.4 million in debt that it expects to hold in perpetuity. If the interest rate is 6.5 percent and the corporate tax rate is 40 percent, what is the value of the interest tax shield? How would your answer change if the interest rate was 5.3 percent. In the first case, the interest tax shield is million. (Round to two decimal places.)
In the second case:
A. There will be no changelong dash the interest tax shield? doesn't depend on the interest rate.
B. There will be no changelong dash the interest tax shield depends directly on the interest rate.
C. There will be a decreaselong dash the interest tax shield depends directly on the interest rate.
D. There will be an increaselong dash the interest tax shield depends inversely on the interest rate.