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1.Considering a corporate tax rate of 20%, compute the present value of interest tax shields generated by the following types of debt: a)100,000 10-year loan
1.Considering a corporate tax rate of 20%, compute the present value of interest tax shields generated by the following types of debt:
a)100,000 10-year loan with maturity in 10 years and interest rate of 6%. Debt is to be paid 20% in 2 years, 30% in 7 years and the remaining at maturity.
b)Perpetual bond (zero-coupon) with an implied yield of 5%.
c)5-year loan with maturity in 5 years, interest rate of 5% and constant annual payments.
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