Markum Enterprises is considering permanently adding $100 million of debt to its capital structure. Markums corporate tax

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Markum Enterprises is considering permanently adding $100 million of debt to its capital structure. Markum’s corporate tax rate is 35%.

a. Absent personal taxes, what is the value of the interest tax shield from the new debt?

b. If investors pay a tax rate of 40% on interest income, and a tax rate of 20% on income from dividends and capital gains, what is the value of the interest tax shield from the new debt?

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Corporate Finance

ISBN: 978-0133097894

3rd edition

Authors: Jonathan Berk and Peter DeMarzo

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Question Posted: Aug 06, 2014 07:31 AM

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Markum Enterprises is considering permanently adding $100 million of debt to its capital structure. Markums corporate tax

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