Establishment Industries borrows $800 million at an interest rate of 7.6%. Establishment will pay tax at an

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Establishment Industries borrows $800 million at an interest rate of 7.6%. Establishment will pay tax at an effective rate of 35%. What is the present value of interest tax shields if:

a. It expects to maintain this debt level into the far future?

b. It expects to repay the debt at the end of 5 years?

c. It expects to maintain a constant debt ratio once it borrows the $800 million and rassets = 10%?

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Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

Question Posted: Jun 30, 2016 09:26 AM

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