Question
1. Company A has $9328251 in permanent debt outstanding. The firm will pay interest only on this debt. The firm's marginal tax rate is expected
1. Company A has $9328251 in permanent debt outstanding. The firm will pay interest only on this debt. The firm's marginal tax rate is expected to be 39% for the foreseeable future. Suppose that the firm pays interest of 6.31% per year on its debt.
What is the annual interest tax shield?
2. Company A has $11644165 in permanent debt outstanding. The firm will pay interest only on this debt. The firm's marginal tax rate is expected to be 47% for the foreseeable future. Suppose that the firm pays interest of 4.94% per year on its debt.
What is the present value of the interest tax shield, assuming its risk is the same as the loan?
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International Financial Management
Authors: Cheol S. Eun, Bruce G.Resnick
6th Edition
71316973, 978-0071316972, 78034655, 978-0078034657
