Question: A $8 million project is expected to return $12 million next year. Your firm is in a 35% combined federal and state marginal income tax

A $8 million project is expected to return $12 million next year. Your firm is in a 35% combined federal and state marginal income tax bracket. You finance the project with $6 million in debt at a rate of 6%. What amount do you save in taxes by using debt instead of cash to finance the project?

126,000

1,400,000

1,274,000

1,526,000

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