(a) Calculate the value of the tax shield in each of the following cases, all based on borrowing of £100 million at 10 per cent interest p.a., pre-tax.

(i) Perpetual life debt, tax rate is 30 per cent.

(ii) Debt repayable in full after five years.

(iii) Debt repayable in equal tranches over five years, interest paid on the declining balance.

(b) Specify the factors that determine the value of the tax shield that a firm can exploit.