Compute the present value of interest tax shields generated by these three debt issues.

Consider corporate taxes only. The marginal tax rate is T c  .35.

a. A $1,000, one-year loan at 8%.

b. A five-year loan of $1,000 at 8%. Assume no principal is repaid until maturity.

c. A $1,000 perpetuity at 7%.

AppendixLO1