The French government offers you a 4-year, EUR 60,000 loan to incentivize you to invest in a French business opportunity. The French government also offers you an interest rate of i_EUR = 10% p.a., with loans of similar risk typically yielding a return of i_EUR = 15% p.a. Assume the loan is paid off in equal annual installments over a four-year period, and you pay interest on the remaining principal amount.

If the French tax rate is 45%, what is the before-tax present value of the interest subsidy on this loan?

Select one:

a.

EUR 3250

b.

EUR 6000

c.

EUR 5725

d.

EUR 6226

e.

EUR 3149

f.

None of these.

Answer rating: 100% (QA)

To find the beforetax present value of the interest subsidy we first need to calculate the interest ... View the full answer