Ten years have passed since Arnell issued $10 million in perpetual interest only debt with a 6%

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annual coupon, as in Problem 6. Tax rates have remained the same at 21% but interest rates have dropped, so Arnell’s current cost of debt capital is 4%.

a. What is Arnell’s annual interest tax shield?

b. What is the present value of the interest tax shield today?

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Corporate Finance

ISBN: 9780137845071

6th Edition

Authors: Jonathan Berk, Peter DeMarzo

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Question Posted: Jun 12, 2024 01:13 AM

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Ten years have passed since Arnell issued $10 million in perpetual interest only debt with a 6%

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Corporate Finance

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